UNIVERSITY OF MAKATI

J. P. Rizal Ext., West Rembo, Makati City

COLLEGE OF BUSINESS AND FINANCIAL SCIENCE
Department of Marketing Management
Course Title Title
Module No. 1
Introduction to Operations Management
Operations Management
with TQM Module Leader Dr. Felicisima V. Rafael
Module Contributors
Timeframe Two weeks
Complete the reading of the Module
How to Complete this
Watch Video Lecture (Module 1 Part 1 and Part 4)
Module?
Participate in Face-to-Face or Online Discussion
Face-to-Face or Online Discussion
Teaching Strategies Upload Video Recorded Lecture to LMS and/or Google Classroom
Give Assignment and Q & A during discussion
INTRODUCTION
Operations Management is the activity of managing the resources which produce and deliver
goods and services (Slack et. al, 2010). Operations can be seen as one of many functions (such as
marketing, finance, personnel and others) within the organization. The operations function can be
described as that part of the organization devoted to the production or delivery of goods and
services. This means all organizations undertake operations activities because every organization
produces goods and/or services.

At the end of this module, students will be able to:

LEARNING OUTCOMES

1. Define and understand the importance of operations management

2. Identify similarities and differences between production and service operations.
3. Summarize the two major aspects of process management.
4. Characterize current trends in business that impact operations management.
5. Explain the key aspects of operations management decision making.

MODULE 1
Introduction to Operations Management with TQM

1. Operations for Goods and Services

Operations is that part of a business organization that is responsible for producing goods and/
or services. Goods as Physical items produced by business organizations, that include raw materials,
parts, subassemblies such as motherboards that go into computers, and final products such as cell
phones and automobiles.
Services are activities that provide some combination of time, location, form, or psychological
 value. Examples of goods and services are found all around you.

While the operations function is responsible for producing products and/or delivering services, it
needs the support and input from other areas of the organization. Business organizations have three
basic functional areas, such as finance, marketing, and operations. It doesn’t matter whether the
business is a retail store, a hospital, a manufacturing firm, a car wash, or some other type of
business; all business organizations have these three basic functions.

A value-added product - can refer to any product that has been subject to additional actions or
combined with extra products to raise the overall value of the product.
CONTENT

A supply chain for bread that create Value Added Product

Source: Operations Management by: William Stevenson

“For Academic Discussion Purposes Only”

The creation of goods or services involves transforming or converting inputs into outputs.
Various inputs such as capital, labor, and information are used to create goods or services using one
or more transformation processes (e.g., storing, transporting, repairing). To ensure that the desired
outputs are obtained, an organization takes measurements at various points in the transformation
process (feedback) and then compares them with previously established standards to determine
whether corrective action is needed (control).

The Goods-service Continuum

The goods and services continuum enable marketers to see the relative goods/services composition
of total products. A product’s position on the continuum, in turn, enables marketers to spot
 opportunities. At the pure goods end of the continuum, goods that have no related services are
positioned. At the pure services end are services that are not associated with physical products.
Products that are a combination of goods and services fall between the two ends. For example,
goods such as furnaces, which require accompanying services such as delivery and installation, are
situated toward the pure goods end. Products that involve the sale of both goods and services, such
as auto repair, are near the center. And products that are primarily services but rely on physical
equipment, such as taxis, are located toward the pure services end.

CONTENT

https://www.google.com/search?q=goods-
services+continuum&hl=en&source=lnms&tbm=isch&sa=X&ved=2ahUKEwjRsNuSxqruAhWJvpQKHcR
VBCEQ_AUoAXoECBUQAw&biw=1366&bih=625#imgrc=FsLYMcCjswK8UM
“For Academic Discussion Purposes Only”

The Goods-Services Continuum: shows that some products are dominated by either tangible or
intangible characteristics- for instance, salt vs. teaching- whereas others tend to include a mixture of
goods and services-such as eating inside the restaurant. Most business theorists see a continuum
with pure service at one endpoint and pure commodity goods at the other endpoint. Most products
fall between these two extremes. Goods are normally structural and can be transferred in an instant
while services are delivered over a period of time. Goods can be returned while a service once
delivered cannot. Goods are not always tangible and may be virtual.

Production of Goods versus Delivery of Services

Although goods and services often go hand in hand, there are some very basic differences
between the two, differences that impact the management of the goods portion versus management
of the service portion. There are also many similarities between the two. Manufacturing and service
are often different in terms of what is done but quite similar in terms of how it is done.
Consider these points of comparison:
1. Degree of customer contact. Many services involve a high degree of customer contact,
although services such as Internet providers, utilities, and mail service do not. When there is a
high degree of contact, the interaction between server and customer becomes a “moment of
 truth” that will be judged by the customer every time the service occurs.
2. Labor content of jobs. Services often have a higher degree of labor content than
manufacturing jobs do, although automated services are an exception.
3. Uniformity of inputs. Service operations are often subject to a higher degree of variability of
inputs. Each client, patient, customer, repair job, and so on presents a somewhat unique
situation that requires assessment and flexibility. Conversely, manufacturing operations often
have a greater ability to control the variability of inputs, which leads to more-uniform job
requirements.
4. Measurement of productivity. Measurement of productivity can be more difficult for service
jobs due largely to the high variations of inputs.
5. Quality assurance. Quality assurance is usually more challenging for services due to the
higher variation in input, and because delivery and consumption occur at the same time.
Unlike manufacturing, which typically occurs away from the customer and allows.
6. Inventory. Many services tend to involve less use of inventory than manufacturing
CONTENT operations, so the costs of having inventory on hand are lower than they are for
manufacturing. However, unlike manufactured goods, services cannot be stored. Instead,
they must be provided “on demand.”

Managing a Process to Meet Demand

Ideally, the capacity of a process will be such that its output just matches demand. Excess
capacity is wasteful and costly; too little capacity means dissatisfied customers and lost revenue.
Having the right capacity requires having accurate forecasts of demand, the ability to translate
forecasts into capacity requirements, and a process in place capable of meeting expected demand.
Even so, process variation and demand variability can make the achievement of a match between
process output and demand difficult. Therefore, to be effective, it is also necessary for managers to
be able to deal with variation.

Four Basic Sources of Process Variations:

1. The variety of goods or services being offered. The greater the variety of goods and services,
the greater the variation in production or service requirements.
2. Structural variation in demand. These variations, which include trends and seasonal
variations, are generally predictable. They are particularly important for capacity planning
3. Random variation. This natural variability is present to some extent in all processes, as well as
in demand for services and products, and it cannot generally be influenced by managers.
4. Assignable variation. These variations are caused by defective inputs, incorrect work
methods, out-of-adjustment equipment, and so on. This type of variation can be reduced or
eliminated by analysis and corrective action.

8 Steps to Proper Operational Process Change

1. Know the Current Process - one of the most important questions to ask at this stage is “Why
is the process in its current state?” All too often, we see individuals try to drive change
without understanding what caused the process to become the way it is. It is a sign of lazy
 analytics if the change proposer assumes the process is flawed because individuals who
designed it were lacking in process design knowledge. Perhaps the changes we seek are only
possible because of new technology or change in supplier.
2. Know Why We Wish to Change the Process - the typical reason for process change is either
cost reduction or variation reduction. For cost-reduction changes, a good cost deployment is
essential. For variation reduction, the change agent should know whether random variation
or special-cause variation (or both) is to be eliminated.
3. Clearly Identify the Change to be Made - this may be in the form of a text-based document, a
flow chart or other organization-appropriate form of documentation. Sample testing of the
documentation to ensure clarity is important.
4. Obtain Feedback and Buy-in from All Affected Stakeholders - the new process should be
expressed to all individuals who are affected by the change. This includes all individuals who
provide an input to the process as well as those who receive an output from the process.
CONTENT 5. Revalidate Process Discipline, Data and Measuring Systems for the Change - at all times, we
should be certain that processes are followed, data are reliable and our measuring systems
are capable of providing data we can use to make good managerial decisions. on the process
we are working to improve, change can occur that makes it necessary to re-validate our
behaviors, methods and measurements.
6. Train for the Change - after the process changes have been detailed and documented with
feedback from all stakeholders, and a method of measurement is implemented, all affected
and responsible operators should be trained. This training must be documented and, if
possible, operators should have the ability to review the training offline.
7. Declare a Clean Line, and Execute the Change - the clean line is a point in time, prior to the
change, which will allow us to categorize data as “before the change” or “after the change.”
This will be a critical step as we go forward in order to keep track of the changes and
analytically validate their effectiveness.
8. Measure, Analyze, Improve and Control - after the change is implemented, results should be
measured and analyzed. Was the change effective? Was the source or sources of variation
eliminated? If appropriate, use the analyzed data to further improve the process, make
adjustments based on reality and, most importantly, control the process.

https://www.industryweek.com/operations/quality/article/22008156/8-steps-to-proper-operational-
process-change
“For Academic Discussion Purposes Only”

Scope of Operations Management

The scope of operations management ranges across the organization. Operations management
people are involved in product and service design, process selection, selection and management of
technology, design of work systems, location planning, facilities planning, and quality improvement
of the organization’s products or services.
The operations function includes many interrelated activities, such as forecasting, capacity
planning, scheduling, managing inventories, assuring quality, motivating employees, deciding
where to locate facilities, and more.
 1. Forecasting - is the process of making predictions of the future based on past and present
data. This is most commonly by analysis of trends.
2. Capacity planning - is the process of establishing the output rate that can be achieved by a
facility.
3. Facility layout - is an arrangement of different aspects of manufacturing in an appropriate
manner as to achieve desired production results. Facility layout considers available space,
final product, safety of users and facility and convenience of operations.
4. Scheduling - the determination of time that is required to perform each operation and also
the time required to perform the entire series of operations as routed.” The principle aim of
scheduling is to plan the sequence of work so that production can be systematically arranged
towards the end of completion of all products by due date.
5. Inventory Management - is an approach for keeping track of the flow of inventory. It starts
right from the procurement of goods and its warehousing and continues to the outflow of the
raw material or stock to reach the manufacturing units or to the market, respectively. The
process can be carried out manually or by using an automated system.
6. Quality assurance - defined as "part of quality management focused on providing confidence
that quality requirements will be fulfilled." The confidence provided by quality assurance is
CONTENT twofold—internally to management and externally to customers, government agencies,
regulators, certifiers, and third parties.
7. Motivating and Training Employees - understanding and motivating employees is the key to
increasing self-worth in the workplace. Training can help employees understand how their
work fits into their company’s structure, mission and goals. Employees often become more
motivated when they understand how their work matters.

Source: Operations Management by: William Stevenson

“For Academic Discussion Purposes Only”

Operation Management and Decision Making

The chief role of an operations manager is that of planner/decision maker. In this capacity, the
operations manager exerts considerable influence over the degree to which the goals and objectives
of the organization are realized. Most decisions involve many possible alternatives that can have
quite different impacts on costs or profits. Consequently, it is important to make informed decisions.
Operations management professionals make a number of key decisions that affect the entire
organization. These include the following:

What: What resources will be needed, and in what amounts?

When: When will each resource be needed? When should the work be scheduled?

When should materials and other supplies be ordered? When is corrective action needed?

Where: Where will the work be done?

How: How will the product or service be designed? How will the work be done (organization,
 methods, equipment)? How will resources be allocated?

Who: Who will do the work?

OPERATIONS TODAY

Advances in information technology and global competition have had a major influence on
operations management. While the Internet offers great potential for business organizations, the
potential as well as the risks must be clearly understood in order to determine if and how to exploit
ASSESSMENT
this potential. In many cases, the Internet has altered the way companies compete in the
marketplace.

Electronic business, or e-business, involves the use of the Internet to transact business. E-
business is changing the way business organizations interact with their customers and their suppliers.
Most familiar to the general public is e-commerce, consumer–business transactions such as buying
online or requesting information. However, business-to-business transactions such as e-procurement
represent an increasing share of e-business. E-business is receiving increased attention from business
owners and managers in developing strategies, planning, and decision making.

MODULE 1: LEARNING CHECK

1. Identify the three major functional areas of business organizations and briefly describe how
they interrelate.

2. Describe the operations function and the nature of the operations manager’s job.
ASSIGNMENT
MODULE 1: ASSIGNMENT

1. List five important differences between goods production and service operations; then list
five
important similarities.

RUBRICS

Davis, Aquilano, Chase,: Fundamentals of Operations Management, 3rd Edition, Copyright 2015 by
the McGraw-Hill Book Companies, Inc., Singapore
REFERENCES
Stevenson, William; Operations Management Eleventh Edition, 2012 by McGraw-Hill Book, Inc.
https://www.google.com/search?
q=goodsservices+continuum&hl=en&source=lnms&tbm=isch&sa=X&ved=2ahUKEwjRsNuSxqruAhWJ
vpQKHcRVBCEQ_AUoAXoECBUQAw&biw=1366&bih=625#imgrc=FsLYMcCjswK8UM
https://www.industryweek.com/operations/quality/article/22008156/8-steps-to-proper-operational-
process-change
https://www.bms.co.in/explain-the-goods-service-continuum/
https://www.processexcellencenetwork.com/lean-six-sigma-business-performance/articles/7-ways-
to-manage-process-variations