INSTITUTE OF DISTANCE LEARNING

KNUST
EXECUTIVE MBA/MPA
CEMBA/CEMPA 557
OPERATIONS MANAGEMENT

Lecture One: 1st Meeting

 LECTURE ONE
BLOCK ONE (1ST MEETING)
ISSUES IN POM
 Issues in POM – An Overview
 Production System: Issues & Environment
 Total Quality Management (TQM)
Production and Operations Mgt An
Overview

Definition
 Operations management is the process
of obtaining and utilising resources to
produce useful goods and services so
as to meet the goal of the organisation
Significant Events in OM

Figure 1.3
 Frederick W. Taylor
 Born 1856; died 1915
 Known as ‘father of scientific
management’
 In 1881, as chief engineer for Midvale
Steel, studied how tasks were done
 Began first motion and time studies
 Created efficiency principles
 Taylor’s Principles
Management Should Take More
Responsibility for:
 Matching employees to right job
 Providing the proper training
 Providing proper work methods and
tools
 Establishing legitimate incentives for
work to be accomplished
 W. Edwards Deming
 Born 1900; died 1993
 Engineer and physicist
 Credited with teaching Japan quality
control methods in post-WW2
 Used statistics to analyze process
 His methods involve workers in
decisions
 Contributions From

 Human factors
 Industrial engineering
 Management science
 Biological science
 Physical sciences
 Information science
 New Challenges in OM
From
 Local or national focus
 Batch shipments
 Low bid purchasing
 Lengthy product development
 Standard products
 Job specialization
To
 Global focus
 Just-in-time
 Supply chain partnering
 Rapid product
development, alliances
 Mass customization
 Empowered employees,
teams
 Characteristics of Goods
 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction
Characteristics of Service
 Intangible product
 Produced and consumed
at same time
 Often unique
 High customer interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
 Goods Versus Services
Attributes of Goods
(Tangible Product)
Can be resold
Can be inventoried
Some aspects of quality
measurable
Selling is distinct from
production
Product is transportable
Site of facility important for cost
Often easy to automate
Revenue generated primarily
from tangible product
Attributes of Services
(Intangible Product)
Reselling unusual
Difficult to inventory
Quality difficult to measure
Selling is part of service
Provider, not product, is
often transportable
Site of facility important for
customer contact
Often difficult to automate
Revenue generated primarily
from the intangible service
Table 1.3
How is Operations relevant to my work
or area of expertise?
 Accounting As an auditor you must understand

the fundamentals of operations
management.”
 Information  “IT is a tool, and there’s no better
Technology place to apply it than in operations.”

 “We use so many things you learn in

 Management operations management—scheduling,
lean production, decision theory,
materials management and lots of
quality tools.”
How is Operations Relevant to my
Major?
 It’sall about processes. I live by
 Economics flowcharts and Pareto analysis.”

 “How can you do a good job

marketing a product if you’re
 Marketing unsure of its quality or delivery
status?”

 “Most of our capital budgeting

requests are from operations,
 Finance and most of our cost savings,
too.”
 Scope and Significance
 The name of production management was
changed to operations mgt as a result of the
need to encompass the rapidly expanding
service sector
 Operations mgt can be described as mgt of
manufacturing and services
 Some of the functional sub areas have achieved
great importance that they are being explored
as distinct subjects of study e.g. quality mgt,
technology mgt, project mgt and ergonomics.
 Systemic View of Operations
 There has been dramatic change in the
scenario of operations mgt
 The production of goods and services is
now customer focus
 Conversion process add value to raw
materials

(Discuss diagram on page 6 of course book)

 Factors of Production
 Traditionallyfactors of production were,
land, labour capital and entrepreneurship
 Has been new classification of resources to
entities namely: men, money, machines,
materials, methods, management,
measurement, message, motive power
 Apart from men and money all the other
resources are knowledge based and
technology oriented
 Productivity Challenge

Productivity is the ratio of outputs (goods and

services) divided by the inputs (resources
such as labour and capital)

The objective is to improve this measure

of efficiency

Important Note!
Production is a measure of output only
and not a measure of efficiency
 Productive Use of resources
 Operations personnel should make maximum use of
resources at their disposal
Input = Output + Waste
 There are two approaches for enhancing
productivity
a.Increasing productivity
Productivity= Output/Input
The ratio can be improved in various ways
1. Increasing output while keeping inputs constant
2. Decreasing inputs while keeping output constant
3. Increasing output in greater proportion than
increase in input
 Productive Use of resources
b. Decreasing waste
• Reduction of waste or scrap is another way of
enhancing productivity
• One way of reducing waste is to minimize the
generation of waste
• The emphasis is shifting to tacking the problem
at the source of the generation of the waste
rather than dealing with the waste
Environmental Concerns of Operations
 Operations management has impacted
negatively to the environment
(comments………)
 As a result of the increase of production, the
environment has been damaged to an extent
that the ozone layer is threatened
 Various laws have been enacted to control
the following pollutants- solid waste, liquid
waste, atmospheric waste and noise
pollution
 Social Concerns of Operations
 Operations mgt can rightly pride itself for
being in the vanguard of material progress
 It has made life more comfortable and
enjoyable
 Industrialization has created the need and
awareness of knowledge and information

(Please discuss the multidisciplinary nature of operations mgt –

refer to page 8 of course material)
Introduction
 Role of Production Mgt
 Production mgt is concerned with proper
mgt and utilisation of enterprise resources
required to produce goods and service
 In this competitive environment
organisations are compelled to develop
strategy which will make them competitive
 For achieving this the functional level
strategies should contribute to the coherent
strategy of the organisation
 The reactive role of
production/operations mgt
 Many companies fail to embrace operations mgt in
their strategy formulation as a result of the following:
1. The production /operations mgr should have the ability to
handle the strategic aspects of production/operations mgt
consistently
2. Production/operations mgrs rely more on verbal
communication and have little interest in written words
3. The production/operations mgrs has the tendency to view
themselves as holding a reactive corporate brief
4. Companies also view the role of production/operations mgt as
short term and reactive to day to day activity and do not
stress the long term nature of this task
Production/Operations mgt A
system view point
 Production /operations mgt is greatly influenced by
the rapid economic change and technological
advancement
 According to Ogawa “production mgt may be defined
as the planning, implementation and control of
production activities conducted by organisational
entity with define performance objectives subject to
modifications according to ambient conditions”
 Production mgt encompasses all the activities right
to the end of the production process
 The production system which are responsive to rapid
changes are capable of reducing the start up period.
The Production System
 Systems Perspective
 Inputs
 Transformation System
 Alter
 Transport
 Store
 Inspect

 Outputs
 Environment
 Inputs
 Inputs include facilities, labor, capital,
equipment, raw materials, and supplies.
 A less obvious input is knowledge of how
to transform the inputs into outputs.
 Characteristics of production systems
 System discrimination- A production system
consisting primarily of inputs and output does not
have the wider connotations involving all phases
from technology forecasting to manufacturing
 Interrelationship among systems- The closed
relationships that exist between production and
pre-production arrangements is known as the
interrelationships between systems
 Stratum Formulation- A production system
consisting of various strata of corporate hierarchy
wherein each stratum has a role to play
 Characteristics of production system
 Specification of functions-As the production system expands it
trends to have large number of hierarchical strata each
performing specialised functions

 Increase of Entropy- according to Ogawa entropy is a

measure of the degradation of the matter and the energy in
the universe to an ultimate state of inert uniformity. To cope
with the rapid changes of technological innovation the
organisation as well as production system needs to be
rejuvenated.

 Insofinality –Insofinality is the process of reaching the same

goal by different routes. There are different approaches to
converting input to output.
Types of production systems controls
 Control is the basis for production mgt. There are two
types of controls
1. Feedback control- In this type of control the output is
obtained as a result of input and processing. It is then
measured to see if it is in agreement with the goal. If
the output is not in agreement with the goal, corrective
measures are taken to address the shortfall
2. Feedforward control- In this type of control mechanism,
input is checked against pre-specified standards prior
to processing as well as output phase. The feedforward
control system collects measurement data, compares
them against the specification and initiate corrective
measures.
 Production system design
 Design of production systems aims to
achieve the right mix of varying
proportions of the element of production
 The production system design must be
effective in its overall context
 Production system must be designed with
both the internal and external factors in
mind
 Productivity Improvement
 Productivity is a function of the relationship between
input and output
 Productivity improvement results when a given output
is achieved with less input or a given output is
achieved with less input
 Productivity is a summary measure of the quantity
and quality of work performance with optimal
utilisation of scare resources
 In order to maximize the output and minimize the
input it is necessary to control the whole of
production systems
 What does TQM mean
 TQM is a systems approach to ensuring quality in an
organisation
 Total Quality Management means that the
organization's culture is defined by and supports the
constant attainment of customer satisfaction through
an integrated system of tools, techniques, and
training. This involves the continuous improvement of
organizational processes, resulting in high quality
products and services.
 Quality activities are planned and managed into
systems and are oriented towards the achievement of
complete customer satisfaction
 What’s the goal of TQM?
“Do the right things right the first time, every
time.”
 TQM:A HISTORIC PERSPECTIVE
 Quality mgt systems have evolved through quality
control, quality assurance and total quality control
 Quality control is concerned with defect detection
by using post-production inspection procedures
 Quality assurance systems aim to produce as per
design specifications and emphasize defect
prevention
 Total quality control systems are concerned with
cost reduction efforts as a drive towards continual
improvement
 Defining Quality
 In
technical usage, quality can have two
meanings:
 the characteristics of a product or service that
bear on its ability to satisfy stated or implied
needs, and
 a product or service free of deficiencies
 Defining Quality- Different Views
Customer’s view (more subjective)
 the quality of the design (look, feel, function)
 product does what’s intended and lasts
Producer’s view
 conformance to requirements (Crosby)
 costs of quality (prevention, scrap, warranty)
 increasing conformance raises profits
Government’s view
 products should be safe
 not harmful to environment
 TQM’s Customer Approach
 the customer defines quality.”
 “the customer is always right.”
 “the customer always comes first.”
 “the customer is king.”
 “quality begins and ends with the
customer”
 Types of Customers
 External
- outside the organization (people
who pay the bills.)
 End-usercustomers
 Manufacturer (OEM) for suppliers.

 Internal - people within your organization

who receive your work
 In many situations, producers have multiple
customers and therefore find it useful to
identify “core customers
 Understanding the customer
 Quality function deployment is a method used to
identify critical customer attributes and to create a
specific link between customer attributes and design
parameters
 It helps marketing and design to answer three
primary question?
a.What attributes are critical to our customers?
b.What design parameters are important in driving
those attributes?
c. What should the design parameter targets be for the
new design?
 Process of developing the house of
quality
 Establishing critical customer attributes for the
product based on their expectations and give them
weights according to their importance
 Establishing critical design parameters that drive
system performance
 Establishing the relationship between customer
wants and design parameters
 Identifying the inter-relationships between the
various design parameters to establish trade-offs
 Focusing on customer perceptions of the company’s
existing product compared to its competitors
 Process of developing the house of
quality involves(cont)
 Focusing on the internal assessment by
filling in the engineering section
 Analysing the matrix and choosing priority
items
Some Data on Customer Attitudes and
Loyalty
 (Source: Winning Back Angry Customers, Quality
Progress, 1993)
 An average customer with a complaint tells 9-10
people; if it is resolved he/she only tells 5 people.
 For every complaint received, there are twenty
others that are not reported.
 It costs 5-10 times more in resources to replace a
customer than it does to retain one.
 Companies spend 95% of service time redressing
problems and only 5% trying to figure out what
made the customer angry.
 Productivity and TQM
 Traditional view:
 Qualitycannot be improved without significant
losses in productivity.
 TQM view:
 Improved quality leads to improved
productivity.
 Basic Tenets of TQM
1. The customer makes the ultimate determination of
quality.

2. Top Management must provide leadership and support

for all quality initiatives.

3. Preventing variability is the key to producing high quality.

4. Quality goals are a moving target, thereby requiring a

commitment toward continuous improvement

5. Improving quality requires the establishment of effective

metrics. We must speak with data and facts not just
opinions
 The three aspects of TQM
 Counting Tools, techniques, and training in
their use for analyzing, understanding,
and solving quality problems

 Customers Quality for the customer as a

driving force and central concern.

 Culture Shared values and beliefs, expressed by

leaders, that define and support quality.
 Total Quality Management
and Continuous Improvement
 TQM is the management process used to
make continuous improvements to all
functions.
 TQM represents an ongoing, continuous
commitment to improvement.
 The foundation of total quality is a
management philosophy that supports
meeting customer requirements through
continuous improvement
 What are ISO 9000 Standards
 ISO 9000 Standards
 Define the required elements of an effective
quality management system
 Can be applied to any company
 Adopted by the United States as the
ANSI/ASQC Q90 series.
 Revised 2000 – wider applicability
 Who created the standards?
 InternationalOrganization for
Standardization - Geneva
 ISO tech committee - TC 176 started in
1979
 Standards created in 1987
 To eliminate country to country differences
 To eliminate terminology confusion
 To increase quality awareness
 How did ISO get started?
 1906 - International Electro-technical Commission
 1926 - International Federation of the National
Standardizing Associations (ISA)
 1946 London - delegates from 25 countries decided
to create a new international organization "the object
of which would be to facilitate the international
coordination and unification of industrial standards
 1947 - ISO began to officially function
 1951 - The first ISO standard was published
 "Standard reference temperature for industrial length
measurement".
 What has ISO Accomplished?

 ISO film speed code

 Standard format for telephone and banking cards
 ISO 9000 which provides a framework for quality
management and quality assurance
 ISO 14000 series provides a similar framework for
environmental management
 Internationally standardized freight containers
 Standardized paper sizes.
 Automobile control symbols
 ISO international codes for country names, currencies
and languages
 ISO 9000:2000 Consists of 3 Areas
 ISO9000:2000 Quality Management Systems:
fundamentals and vocabulary

 ISO
9001:2000 Quality Management Systems –
Requirements (required for certification)
Management responsibility
Resource management
Product/service realization
Measurement, analysis, improvement

 ISO9004-2000 Quality Management Systems –

Guidelines for performance improvement