OPERATION

MANAGEMENT
Operations
management ??
Operations management
1)Operations management deals with the design,direction,control,integration and
improvement of the processes that transform inputs to products or services

“convert the raw materials to

good/services”

2)The main goal of operations management (OM)

-To ensure efficient transformation of
production inputs to outputs
 OPERATION MANAGERS
Operation managers are found in:
Decisions of operation manager
• -hospital
• -banks Strategic decisions tactical decisions
Considering a long term deal with the day to day
• -universities Horizon running of the business
• -airports
Are less structured are more structured
routine and repetitive
Function of operation managers :
• Design systems
• Source materials
• Plan work schedule
• Ensure quality
• Arrange shipments
• Produce products
• Deliver services
 Figure about operations
management

input output

Operations management
 Operations as a Competitive Business Tool
• World Trade Organization (WTO) has brought about both
oppurtinities as well as threats to the firms.
• Any member country can market its product and services to
another member country without much restrictions
• Due to many competition, the firm and
businesss must have to posses distinctive
competency to stay the course.
• For example:
-Having the pricing and bargaining powers in
the marketplace
-Strong brand name
- High Customer satisfaction for their
products and services
• Hence, these distinctive competencies can be
acquired through the effective engagement of
operations management.
Production Sytem

A process that uses

operations resources
to transform input
into desired outputs
 Production
System

Production of Churning out

goods services
(Manufacturing (Service-
based) based)
 Final products

Tangible
Intangible form of
(manufacture
service method
goods)
• Main concern of production
system :

= To ensure high productivity

• Productivity is the value of

outputs (goods and services)
produced divided by the value
of input resources used
 WHAT IS OPERATION ?

An operation is how a product will be made and

operation managers are responsible in designing and
improving on production system.
Example : In a typical car manufacturing process

1) Stamping

- Processed in the stamping department

- Long rolls of coiled steel are cut into sections
(blanks) in the Blanking Line preparation
- Delivered to Welding Shop
2) Welding
- Processed in welding department
- The pieces of metal are put together
- The vehicle is inspected for metal finish smoothness

3) Painting
- Coatings are applied to the body to prevent rust

4) General assembly

- In general assembly department, all components necessary to finish the

vehicles and assembled. All tests are performed on all aspects of the vehicles to
ensure quality and reliability.
The production of chocolate

15
 Production Management
• The management of the entire production system is commonly known as
production management.

• Specific tasks in production management include:

Production • Indicates the practise new

site facility location (potential
location)
selection
Factory • To improve efficiency by
layout arranging equipment
according to its function.
design
Factory Layout
 • Proper scheduling ensures
Productio the important tasks are
covered at appropriate
n work times.
scheduling

• Quality control is a process

Productio through which a business
seeks to ensure that
n quality product quality is with
either reduced or zero
control errors.
 • To procure all necessary
materials needed for
Purchasin production or daily
operation of the company or
g government organization.

• Planned approach of
determining what to order,
Inventory when to order and how
much to order and how
controls much to stock.
 Production Management VS Operation
Management
Production Management Operation Management

1. It’s concerned with 1. It is concerned with services

manufacturing

2. Out put is tangible 2. Output is tangible

3. Job use less labour and more 3. Job use more labour and less
equipment equipment

4. There is no customer 4. Frequent customer

participation participation
 Production Control
• Production control can be represented by the following
domains:

1) Inventory management
-Ensuring the right amount of inventory is used to achieve the
competitive priorities for a business in the most efficient way.

- To find the balance between minimizing inventory holding in

order to reduce costs, while ensuring adequate inventory
levels to meet customer
demand.
2) Aggregate planning and scheduling

The preparation of a company’s overall production

rates,workforce levels and inventory holdings.

Managerial inputs from various functional areas in the

organization are need. E.g. engineering,accounting

• Primary Objectives include achieving:

• 1) Minimized costs
• 2) Maximized Profits
• 3) Maximized customer service
• 4) Minimized inventory investment
3) Resource planning

- Ensures that all resources needed to produce finished

products/services are available at the right time.

- Material requirements planning (MRP) are used in business or

factories nowadays to assist managing & executing their
resource planning.

- MRP is an effective tools to manage their inventory

requirements & scheduling their replenishment orders.
HISTORICAL DEVELOPMENT

1910s • Concept of scientific management --> Frederick

W.Taylor .
• Taylor's Philosophy.
• “ The productivity of a worker is the function of
managerial manoeuvring that could be executed on
the basic of scientific laws.
1913  Henry Ford introduced “ The Moving Assembly
Line ”

 Touted as one of the machine age's greatest

technological innovations.

 This method of manufacturing process reduced

the time for producing a new car chassis.

 Widely used in producing colour TV, computer,

refrigerator etc.
 Mathematical and statistical ---> to
1930s
facilitate sampling inspection

One exception was the Hawthrone

studies.

Executed experiments to examine : The

relationship between changes of certain
environment and the productivity of
assembly workers.
1940s The production issues surrounding World War II

Logistic control and weapons systems design, had

provided a catalyst for the development of
interdisciplinary, mathematically - oriented field of
operation research.

To structure and analyze problems in quantitave

terms to obtain mathematically optimal solutions.

Operation research also known as management

science.
Late 1950s  OM had slowly gained currency
and
and prominence as a field of
early 1960s management among scholars.

Operations decisions are made tp

form a part of the overall corporate
strategy.
 In manufacturing setting, the main contribution was
1970s the application of material requirements planning
(MRP) to production control.

Japanase management philosophies.

1980s
managerial concepts such as just-in-time (JIT) and
total quality control (TQC) were incorported in the
way productions and carried out.

To facilitate the implementation of these new

operations concepts, technologies were extensively
used in various forms of factory automation.
1990s to  Total Quality management (TQM) : Management
the strategy aimed at embedding the awareness of
present quality in all organizational processes and involves
every member of the organization to achieve its set
goals.

In this context, various concepts were introduced

to attain high customers statisfaction of the
services rendered.
 Henry Ford ( 1863 - 1947 )

• 1840s : His parents left Ireland during the potato famine and settle down in the
Detroit area.

• 1893 : Ford built a gasoline engine, and within a few years, an automobile.

• 1899 : Ford left Edison to help run the Detroit Automobile Company.

• 1903 : He set up the Ford Motor Company.

• 1908 : Began the production of the Model T.

• 1913 : Ford gradually adapted the production line and his plant incorporated
the first moving assembly line.
• 1927 : Demand for the affordable car soared even as
production went up, before Ford stopped making the model T.

• Ford became interest in politics, as a succesful and powerful

business leader, was sometimes a participant in political affairs.

• 1915 : He funded a trip to Europe, where World War I was

raging.

• Ford and his family spent a good deal time and money on
charitable work.
ORGANIZATIONAL CHART
• Corporate strategy reflects a firm's plans in how best to
utilize all its resources and business functions to stay
competitive and relevent in the marketplace.

• OS specifics how the firm will utilize its production

capabilities to support its corporate startegy.

• OS involves decisions that relate to the design of a process

and the infrastructure needed to support the process.
Deciding on facility location

Definition Competitive advantages

facility location is the process of 1)Need to produce close to the customer
determining geographic sites for a firm or due to time-based competition ,trade
company operations agreements and shipping costs

Objectives 2)To locate near labour place to take

1)To get the greatest advantage from that advantage of low costs
location
3)Locate near the sources of raw materials
to take advantage of low costs shipping and
low storage.
 Three categories of facility

3)Retail and services facilities

1)Heavy-manufacturing
facilities
Example:automobile,steel
mills and oil refineries
2)light-industry facilities
Example:breweries and
pharmaceutical firms
Eample:grocery and
departmental stores
,restaurants and banks.
Six principal issues

1)Proximity to customers 3)Cost of doing business

-a location close to the customer -to maximizing profit is to reduce

enables faster delivery and prompt operating costs of doing business
response to customers and
complaints

2)Business climate
 6)Quality of labour and
4)Infrastructure technical expertise

-an ideal location for business facilities -the educational and skill levels
must be supported by superb of the labour pool mut match
infrasturucture the compay’s needs

5)Supplier and supporting

industries

-A suitable location is one with high

quality and a competitive supplier
base
Additional factors for international

1. Geopolitical factors
2. Government stability
3. Economic stability and growth
4. Environmental regulations
5. Free trade zone
6. Trading blocks
7. Local cultures
8. Curenccy exchange risks
9. Available technology
INVENTORY SYSTEM
INVENTORY SYSTEM

Inventory is a list of goods and

materials, or those goods and materials
themselves held available in stock by a
business.
 Categories of inventory
• Inventories needed as inputs for the production of
Raw goods and services.
materials

• Consists of input parts (manufacturing) or processes

(service) that have been transformed or processed,
Work-in- but have yet to reach the final products stage.
process

• The items that have come out from the entire

transformation process and already to hit the
Finished marketplace.
goods
 An effective inventory management should
• Ensure a continuous supply of raw materials to facilitate
uninterrupted production.
• Maintain sufficient finished goods inventory for smooth sales
operation, and efficient customer service.
• Minimize the carrying cost and time
• Control investment in inventories and keep it at an optimum
level.
 JUST-IN-TIME
• The philosophy made popular by Japanase.

• JIT System eliminates manufacturing wastes by producing only the

right amount and combination of parts, at the right time.

• Just-in-time also known as lean production or stockless production.

• It was originates from Japan, where it has been in practice since the
early 1970s.
• It was developed and perfectly by Taiichi Ohno of Toyato, who is
now reffered to as the 'father of JIT'

• Taiichi Ohno developed this philosophy as a means of meeting

customer demands with minimum delays.

• JIT can be sucessfully implemented only with high level of

commitments from both internal staff and external suppliers.

• JIT is a subset of an effective supply-chain management.

Supply chain management
• Benefits an effective intergrated supply chain managements.
1. Improved delivery performance
2. Greater productivity and lower costs
3. Reduced inventory throughout the chain
4. Improved forecasting precision
5. Fewer suppliers and shorter planning cycles
6. Improved quality and products that are more technologically advanced
7. Enhanced interoperational communications and cooperation
8. Shortened repair times and enhanced equipment readiness
9. More reliable financial information
CHAIN

PLANNING

PURCHASE RAW PRODUCTION

MATERIALS

WAREHOUSE

CONSUMER WHOLESALER/RETAILER
DISTRIBUTION
 QUALITY-ASSURANCE PROGRAMMES

- Crucial to ensure that customers are happy

- Famous chairman of General Electric Co (GE), John

F Welch had initiated a huge quality-assurance
programme

1) Investing hundreds of million dollars in training.

2) Adopting Motorola Inc, GE trained thousands of managers
to become experts called ‘black belts’
3) Motorola Inc and GE popularized a quality management
called Six Sigma
 “
Quality movement started in Japan
and can be tracked back to 1940s

Soon, countries like United State,

United Kingdom and part of Europe
join the bandwagon

49
INTERNATIONAL ORGANIZATION for STANDARDIZATION (ISO)

- An international standard-setting body to produce world-wide

industrial and commercial standards and to certify products of
manufacture for quality assurance.

- Founded in February 1947

- Headquartered in Geneva, Switzerland

- Main objective = To produce world-wide industrial and

commercial standards and to certify products of manufactures
for quality assurance.

- Although ISO poises itself as non-governmental organization

(NGO), many of its quality standards are adopted to become
national standards and law of many countries

50
 WHAT IS TOTAL QUALITY
MANAGEMENT?

A managerial TQM believes

concept to that quality is
Buzzword in the critical
apply quality success factor
philosophy in 1980s
for business
business performance
 MALAYSIA PRODUCTIVITY CORPORATION

- Established by Malaysian government in 1962,

together with United Nations Special Fund

- Under Ministry of International Trade & Industry

(MITI)

- Vision : To lead Malaysian companies in productivity

enhancement for global competitiveness and
innovation
 Prime Minister Quality
Award
- Malaysian government
entrusted its agency, the Part of criteria that
MPC to manage a few observed :
productivity and quality
related awards. 1) Commitment from
top management
- Awards include : 2) Obsession with
1) Prime Minister Quality quality
Award (PMQA) 3) Education and
2) Quality Management training
Excellence Award
(QMEA)
3) Productivity Award (PA)
THANK YOU, SALAM

54