MBA624-Operations Management

- OPERATIONS MANAGEMENT

UNIT-I

Dr.R.VinayagaSundaram MBA 2021,

 Operations Management

Operations Management is about the way

organisations produce goods and services
What is Operations Management?
The business function responsible for planning,
coordinating, and controlling the resources
needed to produce a company’s products and
services

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What is Operations Management all
about?
• An organisation’s production function is the
set of processes by which the organisation
converts raw materials (e.g. labour,
components, etc.) into saleable finished goods
or services. Every organisation’s production
function has 3 main stages
 Input
Process
INPUT
Output
TRANSFORMED
RESOURCES
• MATERIALS
• INFORMATION
• CUSTOMERS
GOODS
Transformation OUTPUT
OUTP AND
INPUT SERVICES

• FACILITIES
• STAFF

INPUT
TRANSFORMING
RESOURCES
 Operating Activities
• Inputs
• Selection of raw materials.
• Storage of raw materials.
• Processes
• Which production system to use.
• Production quality issues.
• Outputs
• Storage of finished goods.
• Distribution of finished goods.
 Operations Management’s focus
• Operations is not just concerned with what
goes on at the point of production…, but is
also directly concerned with supplying the
materials, the location and layout of facilities,
the programming of operations and the
motivation of employees.
• Organisation’s operating system
• An organization's operating system is a set of
procedures (or rules) which are set up effectively
and efficiently organize and manage their
production function. The main things which an
operating system will be concerned with are:
• Planning the production process.
• Controlling the production process.
• Monitoring the production process.
• Maximizing the efficient use of resources.
• Monitoring and controlling quality levels.
• Monitoring and controlling workers’ activities.
• The main factors which must be considered
when developing this operating system are

• The nature of the product.

• The quantity to be produced.
• The level of quality required.
• The resources available.
• The nature of the resources available (capital
versus labour-intensive).
 Some interfunctional relationships
between the operations function and
other core and support functions

Engineering/ Understanding of the Product/service

capabilities and
technical constraints of the development
function operations process function
Analysis of new Understanding of
technology options process technology New product and
Provision needs service ideas
of relevant Understanding of the
Accounting and data capabilities and
finance constraints of the
function operations process
Operations
Financial analysis function Market
for performance requirements
and decisions Marketing
Understanding of human function
resource needs Understanding Provision of systems for
of infrastructural design, planning and
Recruitment and system
development control, and improvement
needs
and training

Human Information
Resources Technology
function (IT) function
Source: Slack et al (2007) Pearson
Why is Operations Management
Important
• 1. Necessity.

• Without effective operations

management through an operating system, an
organization would have nothing to sell and no
income.
2. Lowered costs and increased profits

• Costs can be lowered and so profits are

increased through:
• Cost-efficient input purchasing.
• Cost-efficient storage of inputs.
• Cost-efficient processing.
• Cost-efficient distribution of finished goods
3. Better good provision and increased
sales and profits
• Efficient operations management means that better quality goods
are made (at low costs due to cost efficiencies) and so customer
satisfaction, sales and profits will be improved.
Operations Competitiveness

Price Flexibility

Quality

Differentiation Time
The Five Competitive Objectives
Quality Being RIGHT

Responsiveness / Speed Being FAST

Competitiveness
Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

• To attain the objectives we have to formulate
the operation strategy, find out the
competitive advantage of that business and
which suits the long –term goals of the
organization –vision /mission
 What is Operations Strategy?

Strategic decisions – means those decisions which …

• Are widespread in their effect on the organisation to

which the strategy refers

• Define the position of the organisation relative to its

environment

• Move the organisation closer to its long-term goals.

Source: Slack et al (2007) Pearson

 m p or ta n ce o f
Str a te g i c I
ti on F u n c ti o n
th e P r od u c
• A vital function is necessary for generating money to pay
employees, lenders, and stockholders.
• Effective production and operations management can:
– lower a firm’s costs of production.
– boost the quality of its goods and services.
– allow it to respond dependably to customer demands.
– enable it to renew itself by providing new products.
Operation Strategy

Operational strategy is essential to achieve

operational goals set by organization in alignment
with overall objective of the company.

Operational strategy is design to achieve business

effectiveness or competitive advantage.
Operational strategy is planning process which aligns the
following:

In this global competitive age organization goal tend to change

from time to time therefore operations strategy as a
consequence has also be dynamic in nature. A regular SWOT
analysis ensures that the organization is able to maintain
competitive advantage and business leadership.
 Strategic Management Process for
Production and Operation
For success of organizational strategic objective, strategic
planning has to trickle down to various function areas of the
business. In order to build strategy management process a
sequential process as below is followed

Competition Analysis: In this step company evaluates

and studies current competition in the market and
practices that are followed in the industry for
operations and production vis-à-vis company policies
Goal Setting: Next step involves narrowing down the objective
towards which the organization wants to move towards.

Strategy Formulation: The next step is breaking down of

organizational goals into operations and production strategies.

Implementation: The final step is to convert operations and

production strategies into day to day activities like production
schedule, product design, quality management etc.

As organizations are always customer-centric, production and

operation strategy for organization are built around them
Where does the Business get
its Competitive Advantage?

The technological
specification of its Product /
product / service? Service
Technology

The way it The way it

positions itself Marketing Operations produces its
in its market? goods and
services?

Source : Slack et al Operations Mgmt Pearson 2001

What is the role of the operations function?

Operations Operations Operations

as an Implementer as Supporter as Driver
Strategy Ops
Strategy

Ops
Ops Strategy
Operations Operations Operations
implements supports strategy drives strategy
strategy
objectives
Business Information Flow

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 OM Across the Organization

• Most businesses are supported by the

functions of operations, marketing, and
finance

• The major functional areas must interact to

achieve the organization goals

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Why other managers to know OM
 Marketing is not fully capable of meeting customer needs if
they do not understand what operations can produce
 Finance cannot judge the need for capital investments if they
do not understand operations concepts and needs
 Information systems enables the information flow throughout
the organization
 Human resources must understand job requirements and
worker skills
 Accounting needs to consider inventory management,
capacity information, and labor standards
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