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Operations Management

O P M
Introduction to Operations Management
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After studying this course the students should be able

to:
Realize the industrial importance of operations management.
Analyze the operations methods to improve productivity.
Make strategic moves to attain organizational goals.
Quality and economy of scale for product/services.
Overall coordination of system operations.
Apply various techniques towards decision making.
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TEACHING–LEARNING METHODOLOGY:
Lectures, Reading Material, / Corporate Visits, Development Exercises,
Project Report, Watch Exercises /Handouts, Case Studies, any other
Teaching–Learning tool.
TEXT BOOK: “Operations Management by William J Stevenson.
REFERENCE BOOK:
1.“Operations Management by Russell & Taylor, 9th Edition.”
2.“operations Management by Chase & Jacobs, 11th edition.”

ASSESSMENT & EVALUATION:

Examination Type Marks Percentage (%)

Quiz & Assignments 15
Project 10
1st sessional 10
2nd sessional 15
Final 50
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Introduction to Operations Management

Operations Management
The management of systems or processes that
create goods and/or provide services

The design, operation, and improvement of the

system that create and deliver the firm’s
primary products and services

The ongoing activities of designing reviewing and using

the operating system to achieve service outputs as
determined by the organization for customer
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Introduction to Operations Management

Operations Management includes:

Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
And more . . .
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Introduction to Operations Management

What are the Organizations:

An organizations is a business entity that can work for
profit or non profit purpose to generate a value added
product or service for its customers.

Organization

Finance Operations Marketing

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Introduction to Operations Management

Business Operations Overlap

Operations

Marketing Finance
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Introduction to Operations Management

Value-Added
The difference between the cost of inputs
and the value or price of outputs.

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
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Introduction to Operations Management

Stage of Production Value Value of

Added Product
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
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Introduction to Operations Management

Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
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Introduction to Operations Management

Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
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Introduction to Operations Management

Hospital Process
Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
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Introduction to Operations Management

Finance
Its basic function is securing resources at
favorable prices and proper allocation.
Finance should exchange expertise
with operations in:
– Budgeting
– Economic analysis of investment proposals
– Provision of funds
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Introduction to Operations Management

Marketing
It promotes and sell the goods or services of the
organization and asses the needs and
requirements of the customer, communicate to
operations also.
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Introduction to Operations Management

Operations Interfaces

Industrial Maintenance
Engineering
MIS

Distribution Public Relations

Operations

Purchasing Personnel
Accounting
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Introduction to Operations Management

Major Characteristics of Production Systems

Degree of standardization

Type of operation
project
job shop
repetitive production
continuous processing
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Introduction to Operations Management

Manufacturing or Service?

Tangible Act
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Introduction to Operations Management

Key Differences
• Customer contact
• Uniformity of input
• Labor content of jobs
• Uniformity of output
• Measurement of productivity
• Quality assurance
• Amount of inventory

These differences are beginning to fade

in many cases
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Introduction to Operations Management

Manufacturing vs. Service

Characteristic Manufacturing Service
Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
High
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Introduction to Operations Management

Responsibilities of Operations Management

Planning Organizing
– Capacity – Degree of centralization
– Location – Subcontracting
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling – Issuance of work orders
– Inventory – Job assignments
– Quality
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Introduction to Operations Management

Key Decisions of Operations Managers

What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
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Introduction to Operations Management

Models
A model is an abstraction of reality.
– Physical
– Schematic
Tradeoffs
– Mathematical

What are the pros and cons of models?

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Introduction to Operations Management

Models Are Beneficial

 Easy to use, less expensive
 Require users to organize
 Systematic approach to problem solving
 Increase understanding of the problem
 Enable “what if” questions
 Specific objectives
 Consistent tool
 Power of mathematics
 Standardized format
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Introduction to Operations Management

Systems Approach
“The whole is greater than
the sum of the parts.”

Sub
optimization
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Introduction to Operations Management

Decision Making

System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
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Introduction to Operations Management

Decision Making

System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance
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Introduction to Operations Management

Pareto Phenomenon
• A vital few things are important for reaching
an objective or solving a problem.
• 80/20 Rule - 80% of problems are caused by
20% of the activities.

How do we identify the vital few?

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Introduction to Operations Management

Historical Evolution of Operations Management

Industrial revolution (1770’s)

Scientific management (1911)
Mass production
Interchangeable parts
Division of labor
Human relations movement (1920-60)
Decision models (1915, 1960-70’s)
Influence of Japanese manufacturers
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Introduction to Operations Management

Recent Trends
 The Internet
 E-Business
 Supply Chain Management
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Introduction to Operations Management

Simple Product Supply Chain

Suppliers’ Direct Final
Producer Distributor
Suppliers Suppliers Consumer
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Introduction to Operations Management

Continuing Trends

• Quality and process improvement

• Technology
• Globalization
• Operations strategy
• Environmental issues