BME2:
the overall organization strategy. Many companies prepare a 5-year pro-forma to
Operations 
Management
BME2: OPERATIONS MANAGEMENT
WEEK 1: CONCEPT OF OPERATION MANAGEMENT
OPERAION MANAGEMENT
-is the management of systems or processes that create goods and/or provide
services. It is also the core of what the organization does
-refers to the transformation process of inputs such as materials, machines, labor,
capital and management, into outputs (i.e., goods and services).
-refers to planning, organizing, and controlling all resources and activities to
provide goods and services, which applies equally to manufacturing and services
in the private and public sectors and even governments.
The Role of Operations Management in the Organization
Operations is one of the three strategic functions of any organization. This means
that it is a vital part of accomplishing the organization’s strategy and ensuring its
long-term survival. The other two areas of strategic importance to the
organization are marketing and finance. The operations strategy should support
assist in their operation planning. The pro forma uses information from past and
current financial statements in an effort to predict future events such as sales,
and capital investments
STRATEGIC VERSUS TACTICAL DECISION
Strategic operations decisions include the following:
 facility location decisions,
 the type of technologies that the organization will use,
 determining how labor and equipment are organized,
 how much long-term capacity the organization will provide to meet
customer demand.
2. Tactical operations decisions have short to medium term impact on the
organization, often involve less commitment of resources, and can be changed
more easily than strategic decisions. The following are some tactical decisions:
 workforce scheduling,
 establishing quality assurance procedures,
 contracting with vendors,
 managing inventory.
TRANSFORMATION PROCESS
Operations management transforms inputs (labor, capital, equipment, land,
buildings, materials and information) into outputs (goods and services) that
provide added value to customers.
Feedback - to ensure that the desired outputs are obtained an organization takes
measurements at various points in the transformation process
Control - then compares them with previously established standards to determine
whether corrective action is needed
Value-added - is the term used to describe the difference between the cost of
inputs and the value or price of the outputs.
  Product and services design
 Process selection and management of technology
 Design of work system
 Location and facilities planning
 Quality improvement of product/services

THE OPERATION FUNCTIONS

3. Forecasting
4. Capacity planning
5. Scheduling
6. Managing Inventories
7. Assuring Quality
8. Motivating and training employees
9. Locating facilities

Two Kinds of Operation Process
1. Production of Goods
-This results in a tangible output, such as an automobile, eyeglasses,
anything that we can see or touch. It can take place in a factory, but can
occur elsewhere.
2. Delivery of Services
-on the other hand generally implies an act
TYPES OF OPERATION
 Goods producing - farming, mining, construction, manufacturing, power
generation
 Storage / Transportation - warehousing, trucking, mail service, buses,
hotels, airlines.
 Exchange - retailing, wholesaling, renting, leasing stock exchange
 Entertainment - films, radio and TV plays, concerts, recordings
 Communication - newspaper, TV and radio news, telephone , satelites
Operation Manager
-its primary function is to guide the system by decision making. Certain
decisions affect the design of the system and others affect the operation of
the system.
2 TYPES OF SYSTEM IN DECISION MAKING
1. System Design - involves decisions that relate to system capacity, the
geographic location of facility, arrangement of departments and
placement of equipment on physical structures, product and service
planning and acquisition of equipment.
2. System Operation - involves management of personnel, inventory
planning and control, scheduling, project management and quality
assurance.
WEEK2: OBJECTIVES OF OPERATIONS MANAGEMENT
1. Right Quality

OPERATION MANAGEMENT PEOPLE ARE INVOLVED IN THE FOLLOWING:

Quality is a degree to which it conforms to the design specification and satisfies
the consumer in general. Right quality must lead to effectiveness of the
production process.
2. Right Quantity
The manufacturing organization should produce the products in the right number.
If they are produced in excess of demand, the capital will block up in the form of
inventory, and if produced in short of demand, it leads to the shortage of
products. Quantity produced always shows a measure of efficiency of the
production process.
3. Right Time
Right time delivery is one of the important parameters to judge the effectiveness
of the production department. Product and services should reach the consumer
in time. If timeliness is not followed, then the product may be considered as
waste, hence right time production leads to accuracy.
4. Right Manufacturing
In the era of competition, manufacturing costs play a very important role in the
success of the organization. An organization cannot increase the sales price
outright, nor can it reduce its profit margin. The only way to survive is either to
reduce manufacturing cost or maintain it at the same level. Hence, right
manufacturing costs lead to profitability.
5. Right Place
Delivery locations and manufacturing locations are very important.
Manufacturing and delivering the goods at the right place is very important. It can
be taken as a key factor for success. Delivering the goods at the right place
ensures the perfection of the production process.
6. Right Information
In the era of information technology, collecting and providing right information is
the key to success for any business. Passing the information from the right source
to the right receiver completes the fitness of the information cycle.
THE VALUE CHAIN
Value Chain is a network of facilities and processes that describes the flow of
materials, finished goods, services, information, and financial transactions from
suppliers, through the facilities and processes that create goods and services, and
those that deliver them to the customer.
Value chains involve all major functions in an organization. This includes not only
operations but also purchasing, marketing and sales, human resource
management, finance and accounting, information systems and technology,
distribution, and service and support.
Michael E. Porter, of Harvard Business School, introduced the concept of a value
chain in his book, Competitive Advantage: Creating and Sustaining Superior
Performance. He wrote: "Competitive advantage cannot be understood by
looking at a firm as a whole. It stems from the many discrete activities a firm
performs in designing, producing, marketing, delivering, and supporting its
product."
COMPONENTS OF VALUE CHAIN
Primary Activities
Primary activities consist of five components, and all are essential for adding
value and creating competitive advantage:
 Inbound logistics include functions like receiving, warehousing, and
managing inventory.
 Operations include procedures for converting raw materials into a
finished product.
 Outbound logistics include activities to distribute a final product to a
consumer.
 Marketing and sales include strategies to enhance visibility and target
appropriate customers—such as advertising, promotion, and pricing.
 Service includes programs to maintain products and enhance the
consumer experience—like customer service, maintenance, repair,
refund, and exchange.
2. Support Activities
 The role of support activities is to help make the primary activities more
efficient. When you increase the efficiency of any of the four support
activities, it benefits at least one of the five primary activities. These support
activities are generally denoted as overhead costs on a company's income
statement:
SUPPLY CHAIN MANAGEMENT PROCESS
 Procurement concerns how a company obtains raw materials.
 Technological development is used at a firm's research and
development (R&D) stage—like designing and developing
manufacturing techniques and automating processes.
 Human resources (HR) management involves hiring and retaining
employees who will fulfill the firm's business strategy and help
design, market, and sell the product.
 Infrastructure includes company systems and the composition of its
management team—such as planning, accounting, finance, and
quality control.
1. Customer Relationship Management: It plans, controls and assesses
AWESOME WORDS customer interaction and data, during the life cycle, with the aim of
The Supply Chain building strong relations.
2. Customer Service Management: It assists in administering product and
Supply Chain - a sequence of activities and organization involved in producing service contracts.
and delivering a good or services 3. Supplier Relationship Management: It guides in developing and
Supply Chain Management - refers to the management of key business processes maintaining a good relationship with the suppliers. At the time of
which are related to the product flow and conversion of goods from the raw selecting suppliers, priority is given to suppliers capability regarding
material to the goods ready for use by the final consumer. quality, reliability, innovation, services and cost reductions.
4. Manufacturing Flow Management: It covers activities associated with the
SCM involves a complete series of activities which may or may not be movement of products inside and outside the factories, to have flexibility
interconnected to one another, such as sourcing, procurement, transformation, in the manufacturing process.
material handling, logistics, as well as collaborating with the channel partners that
assist in the process of acquiring raw material and distributing it to the ultimate 5. Demand Management: A comprehensive structure is provided to best
user. Channel partners can be suppliers, wholesalers, distributors, retailers, understand the customer’s needs.
dealers, third party service providers, customers, etc 6. Order Fulfilment: It encompasses all the activities which identify customer
needs, frames the logistics network and fulfils orders.

7. Product Development and Commercialization: A framework is provided

for developing and introducing new products into the market.
 8. Returns Management: It is concerned with functions associated with 5. Finance
returns, reverse logistics etc. It is an indispensable part of the SCM process 6. Customer service
and is required in both the upstream and downstream
What Is Customer Service?
Supply Chain Management is an improvement over the traditional logistics
Customer service is the direct one-on-one interaction between a consumer
management which helps in the timely delivery of the products to customers. It
making a purchase and a representative of the company that is selling it. Most
also plays a crucial role in increasing business profits, by reducing the overall cost,
retailers see this direct interaction as a critical factor in ensuring buyer
which improves its competitiveness also.downstream movement of goods for the
satisfaction and encouraging repeat business.
best possible use of organizations resources.
Customer Service Objectives
Types of Supply Chain
1. Become a customer advocate and a brand ambassador
2. Build customer loyalty
3. Deliver fast, effective resolutions
4. Improve customer satisfaction

Push Model: In this model, the actual demand determines the inventory to be
produced. So, it is concerned with the individual customer, and it has a WEEK 3
marketing-oriented approach.
Responsibilities of Operation Manager

1. Lead, motivate, and support a large team within a time-sensitive and

demanding environment, including setup and implementation of career
development plans for all direct reports and problem resolution
2. Manage timely data collection to update operations metrics to achieve
productivity targets, reduce cost per unit, eliminate errors, and deliver
excellent customer service
3. Partner with cross-functional support teams in improving the proprietary
Pull Model: As per this model, the customer places the order first, after that the tools and systems
manufacturing of the product is done. It has a customer-oriented approach. 4. Work closely with legal and safety departments to make sure activities
remain compliant
The supply chain includes all functions involved in receiving and filling a customer 5. Oversee materials and inventory management
request. These functions include: 6. Conduct budget reviews and report cost plans to upper management
1. Product development PRODUTION
2. Marketing
3. Operations -the process of combining various material inputs and immaterial inputs (plans) in
4. Distribution order to make something for consumption (the output) The production function
specifies the maximum output that can be produced with a given quantity of
input.
MARKETING OPERATION
Manufacturing is a multi-step process that involves the conversion of raw
materials into finished products using machinery. Manufacturing companies, of
course, operate by taking raw materials and converting them into products. The
raw materials are cut, sized and/or shaped to create a new and finished product.
The term "manufacturing operations" refers to a framework in which man,
machine and material come together to produce a tangible product. It deals with
all the supply chain activities such as gathering requirements from customers,
procuring raw materials, allocating resources, scheduling the production,
maintaining the inventory, and delivering end products to customers.
MARKETING OPERATION ARE CLASSIFIED INTO:
Process Manufacturing - is an operational method that produces goods by
following a specified sequence of steps or a predefined formula.
Examples : pharmaceutical and food and beverage industries
Discrete Manufacturing - emphasizes producing individual finished goods that are
distinct from one another.
Examples: automobiles and smartphone manufacturers
3 MANUFACTURING METHODS
1. Make-To-Stock (MTS)
In this system a factory produces goods that are held in stock at stores and
showrooms. This means that a market for the goods needs to be predicted so
that the items can be produced in advance ready for the consumer. However,
producing too much can mean that surplus stock needs to be sold at a loss while
producing too little may mean the market is missed and costs aren’t covered by
sales.
2. Make-To-Order (MTO)
The make to order method allows the manufacturer to wait until orders are
received before production begins. This makes it much easier to manage
inventories and react to market demand. However, customers will need to wait
for their products to be produced and the manufacturer will need a steady
stream of orders to keep the factory in production and profitable.
3. Make-To-Assemble (MTA)
This method is similar to making stock, except the factory will produce
component parts in anticipation of orders for assembly. This means that the
manufacturer is ready to fulfill customer orders as they arrive, but can leave the
manufacturer with a stock of unwanted parts if there is no demand
CHARACTERISTIC OF MANUFACTURING OPERATION
Productivity Quality Control Good Design Cost-Effectiveness
SERVICE OPERATION
Services are intangible and non-physical products offered by one party to another
in exchange for money. As reported in the Harvard Business Review, service-
providing operations aim to deliver an experience that leads to customer
satisfaction.
Service operations engage a wide range of teams to deliver services, including
professional service teams, customer support teams and customer experience
teams.
3 IMPORTANT COMPONENTS OF SERVICE OPERATION
1. Labor -a skilled workforce or semi-skilled workforce that directly engages
with customers to provide services.
2. Service model - is the approach that the organization adopts to deliver
intangible value to customers.SAAS (Software-As-A-Service) is a perfect
example of a service operations model adopted by software firms. A
 restaurant drive-in option is another service operations model that lets
customers remain in parked vehicles while they eat.
3. Service environment - refers to the ambiance of the premises where the
service provision takes place.
CLASSIFICATION OF SERVICE FIRMS
1. Equipment Based - can then be subdivided into automatic services such
as vending machines and automated car washes; services monitored by
unskilled labor, such as dry cleaning and movie theaters; and services
operated by skilled labor, such as excavating, airlines, and computer
services.
2. People Based - are subdivided into those utilizing unskilled labor, such as
lawn care, security guards, and janitorial service; those utilizing skilled
labor, such as appliance repair, plumbing, catering, electrical work, and
auto body repair; and professional services such as law, medicine,
accounting, and consulting.
CHARATERISTICS OF SERVICE OPERATION
1. Intangibility:
Services cannot generally be seen, tasted, felt, heard or smelt before being
bought. The potential customer is unable to perceive the service before (and
sometimes during and after) the service delivery. For many customers of car
repair, for example the service is totally intangible – they often cannot see what is
being done and many indeed are unable to evaluate what has been done.
2. Inseparability:
The manufacturer is also able to make goods at a time which is convenient to
itself, and then make them available to customers at times which are convenient
for them. Production and consumption are said to be separable.
3. Variability:
An unavoidable consequence of simultaneous production and consumption is
variability in performance of a service. The quality of the service may vary
depending on who provides it, as well as when and how it is provided. One hotel
provides a fast efficient service and another short distance away delivers a slow,
inefficient service.
4. Perishability:
Services cannot be stored for later sale or use. Hotel rooms not occupied, airline
seats not purchased, and college places not filled cannot be reclaimed. As services
are performances they cannot be stored. If demand far exceeds supply it cannot
be met, as in manufacturing, by taking goods from a warehouse. Equally, if
capacity far exceeds demand, the revenue and/or value of that service is lost.
5. Heterogeneity:
Even though standard systems may be used, for example to handle a flight
reservation, to book in a customer’s car for service or to quote for insurance on
his life. Each ‘unit’ of a service may differ from other ‘units’. Franchise operations
attempt to ensure a standard of conformity, but ultimately it is difficult to ensure
the same level of output in terms of quality.
6. Lack of ownership:
Lack of ownership is a basic difference between a service industry and a product
industry because a customer may only have access to or use of a facility (e.g. a
hotel room, a credit card). Payment is for the use of, access to or hire of items.
With the sale of a tangible good, barring restrictions imposed by a hire purchase
scheme, the buyer has full use of the product.
WEEK 4
PRODUCTION PLANNING AND CONTROL
Production planning and control is the organization and planning of the
manufacturing process.
It coordinates supply and movement of materials and labor, ensures economic
and balanced utilization of machines and equipment as well as other activities
related with production to achieve the desired manufacturing results in terms of
quantity, quality, time and place.
THE VARIOUS ACTIVITIES INVOLVED ARE
❖Designing a product
❖Determining the equipment & capacity requirements
❖Designing layout of physical facilities.
❖Designing material handling system
❖Designing sequence of operations
THERE ARE THREE STAGES IN PPC
1. Planning : The choice from several alternatives of the best utilizing the
available resources to achieve the desired objective .
2. Operations: Performance in accordance with details set out in the
production plan.
3. Control: The monitoring of performance through feedback by comparing
the results achieved with planned targets so that performance can be
improved.
OBJECTIVE OF PPC
 To deliver goods in required quantities to customers in required delivery
schedule
 To ensure maximum utilization of all resources
 To ensure production quality products
 To minimize the product throughput time (amount of time required for a
product to pass through a manufacturing process)
 To maintain optimum level inventory
 To maintain flexibility in manufacturing operations
 Coordinate between labour and machines and various supporting
departments
CLASSIFICATION/FUNCTIONS OF PPC
1. Materials : Procurement, Storage, inventory
2. Methods : Process, Operations and their sequence
3. Machines : Allocation of Jobs
4. Routing : Flow of work
5. Estimating : Operations time
6. Scheduling : timetable of production, priority sequence
7. Dispatching : authorizing start of operations
8. Expediting : Follow up and keeping records of progress
9. Evaluating : Assesing the performance effectiveness
PRINCIPLES OF PPC
1. Types of production determines the kind of production planning & control
2. Time is common denominator for all scheduling activities
3. The size of the plant has relatively little to do with the type of PPC system
needed
4. The highest efficiency in production is obtained by manufacturing the required
quantity of a product
LEVELS OF PPC
1. Strategic Planning(Long range): It is process of thinking though the
organizations current mission and environment and setting a guide for
future decisions and results. e.g. Technology forecasting and choice of
appropriate technology for the long range time horizon.
2. Tactical Planning(Intermediate Range): It is done over an intermediate
term or medium range time horizon by middle level management. These
plans focus on aggregate products rather than individual products.
3. Operational Planning(Short Range ): It is done over a short range time
span developed by junior level management. It is concern with utilization
of existing facilities rather than creation of new facilities.
BENEFITS OF PPC
 PPC coordinates all the phases of production / Operating system
 An efficient plan results in higher quality ,better utilization of resources,
reduced inventories, better customer services.
 An efficient plan enable the firm to improve its sales turnover , market
share and profitability.
LIMITATIONS OF PPC
 PPC function is based on certain assumptions or forecasts of customer’s
demand, Plant capacity, availability of materials etc
 Employees may resist/oppose change in production levels set as per
production plans.
 This process is time consuming when we need to carry out routing and
scheduling function for large products.
 This function become difficult when environmental factors changes
rapidly
FACTORS DETERMINING PRODUCTION PLANNING PROCEDURES
1.Volume of production: The amount & intensity of production planning is
determined by the volume and character of the operations & nature of
manufacturing process. Production planning is expected to reduce manufacturing
costs.
2.Nature of production Process: In job shop ,the production planning may be
informal and the development work methods is left to individual workman who is
highly skilled
3.Nature of operations: Detailed production planning is required for repetitive
operations for example continuous production of single standardized product
PRODUCTION PLANNING SYSTEM
There are two interrelated subsystems in the production planning system
1. Product Planning System is the act of developing a guide for the design and
production of a given product or service. Production planning helps organizations
make the production process as efficient as possible.
2. Process Planning System It is the act of preparing detailed work instructions to
produce a part. It is a complete description of specific stages in the production
process.
WEEK 4
PRODUCTION CONTROL SYSTEM
The production Control System consists of a group of procedural elements that
operate as a whole to fulfill four functions
1. Means of setting the system in motion such as production orders
2. Methods to determine Lead time for production
3. Methods to control & monitor production What, where & How work is to be
done
4. Techniques for measuring & recording data on machine utilization
FACTORS DETERMINING PC PROCEDURES
Magnitude to operations:
The size of operation (time taken to complete operation)and the distance
traveled by the parts from operations to operations are important in establishing
proper production control procedures.
Control organization and the formal procedures as the size of the operations
increases and dependent operations are more physically separated
Following factors need to be considered before making a choice of
manufacturing process.
a) Effect of volume/variety: This is one of the major considerations in selection of
the manufacturing process. When the volume is low and variety is high,
intermittent processes are most suitable and with increase in volume and
reduction in variety continuous processes become suitable. The following figure
indicates the choice of process as a function of repetitiveness. Degree of
repetitiveness is determined by dividing the volume of goods by variety.

b) Capacity of the plant: Projected sales volume is the key factor to make a
choice between batch and line process. In case of line process, fixed costs are
substantially higher than variable costs. The reverse is true for batch process

d)Flexibility and Efficiency: - The manufacturing process needs to be flexible

enough to adapt contemplated changes and volume of production should be
large enough to lower costs. Hence it is very important for entrepreneur to
consider all above mentioned factors before taking a decision regarding the type
of manufacturing process to be adopted as for as SSI are concerned they usually
adopt

Production control is just one of multiple types of control in organizations. Most

commons other types are:

Management control, one of the managerial functions like planning, organizing,

staffing and directing. It is an important function because it helps to check the
errors and to take the corrective action so that deviation from standards are
minimized and stated goals of the organization are achieved in a desired manner.

Inventory control, the supervision of supply, storage and accessibility of items in

order to ensure an adequate supply without excessive oversupply.

Quality control, the process by which entities review the quality of all factors
involved in production.