Let’s Learn Operations Management

Dr. Karishma Chaudhary

 Activity- 1

•Bring Your Favourite Product(If

possible show it on Camera)
 Why OM?

You are here to study Business –

1. All organizations must offer a product or
service that someone value
• Manufacturer? Transportation? Design firms?
• IT firms?
• Operations Function: it is collection of people,
technology and systems within an organization
that has primary responsibility for providing the
organization’s products and services.
2. Most organizations are part of a larger
Supply Chain
Supply Chain-???
• Supply chain is a network of manufacturers and
service providers that work together to convert
and move goods from the raw material stage
through the end user.

• These manufacturers and service providers are

linked together through physical flows,
information flows and monetary flows.
Consider a store at the mall that sells shoes.

Q1- What service it is providing to customers?

- A convenient location and a wide selection of products
Q2- Store acts just a link to a larger Supply Chain. What can be other
actors in this Supply chain?
-Raw material provider
-Manufacturer that molds and assemble shoes
-Wholesalers
- transportation firms
- Software firms and Internet Service Provider(ISPs) that support the
information system and coordinate the Physical flows
- Financial Firms that help distribute funds across the Supply Chain
3. Organizations must carefully manage their operations and supply chain
in order to prosper and indeed survive.

• Some fundamental decisions may be –

How many shoes should we make and in what style and sizes?
What kind of peoples skills and equipment do we need?
Where should we locate our plants/stores?
Supply Chain decisions- raw materials, Transportation decisions
OM - Organization Chart
Why to study OM?
Business Education would be incomplete without understanding
modern approach and concepts operations management.
OM provides systematic way of looking organizational processes.
OM provides enormous scope and career opportunities.
Concepts and tools of OM widely used in others functions of
organization & management.
 Why to study OM?
Exchange of information and cooperative decision making

PR
Operations
Accountin
g
MIS
Operations
Finance Marketing

Legal HR

Three major functional areas overlap in every business Operations interfaces with supporting functions
organizations.
Source: https://www.raconteur.net/manufacturing/manufacturing-gets-personal-industry-5-0/
Key takeaways:

• The main purpose of the operations management is to run the

business operations successfully, smoothly and effectively by
using the minimum resources and meeting customer
expectations.
To sum up:

• The application of operations management to our every day

activities is illustrated in the following quotation:
• 'Operations management is about the way organizations
produce goods and services.
• Everything you wear, eat, sit on, use, read or knock about on the
sports field comes to you courtesy of the operations managers
who organized its production.
• Every book you borrow from the library, every treatment you
receive at the hospital, every service you expect in the shops and
every lecture you attend at university - all have been produced.
• This definition reflects the essential nature of Operations
Management: it is a central activity in organizing things. Another
way of looking at an operation, is to consider it as a
transformation process ...
As a Transformation Process
• Operations are a transformation process: they convert a set of
resources (INPUTS) into services and goods (OUTPUTS).

• These resources may be raw materials, information, or the customer

itself.
• These resources are transformed into the final goods or services by
way of other 'transforming' resources - the facilities and staff of the
operation.

• An obvious example is a cabinet maker, who takes some wood, cuts

and planes it, and then polishes it until a piece of furniture is
produced.
• Information
A tourist office gathers and provides information to holiday makers, and assists in
advising on places to stay or visit.

• Customers
At an airport, you are one of the many resources being processed. The operation
you are involved in is about processing your ticket and baggage, moving from ticket
desk through the customs and duty-free areas, to deliver you to the awaiting plane.

• The next time you stand on a moving walkway, think of yourself as a tin of baked
beans moving along a factory conveyor!
Process Model – Examples…
(Resource Courtesy:, Chase, Aquilano & Jacobs, Operations Management for competitive advantage,
11th Edition, Chapter 1,P-11.)
• extending the process ...
• If we add a few more parts to the transformation process,
we can see the key elements that operations managers
need to consider. Operations is about:
• designing services, products and delivery systems;
• managing and controlling the operations system; and
• finding ways to improve operations.
Case Study- The PowerSki Jetboard
• https://www.youtube.com/watch?v=kEo3VP5wDT0
• The product development process can be complex and lengthy.
• It took sixteen years for Bob Montgomery and others at his
company to develop the PowerSki Jetboard, and this involved
thousands of design changes.
• It was worth it, though: the Jetboard was an exciting, engine-
propelled personal watercraft – a cross between a high-
performance surfboard and a competition water-ski/wakeboard
that received extensive media attention and rave reviews.
• It was showered with honors, including Time magazine’s “Best
Invention of the Year” award.
• Stories about the Jetboard appeared in more than fifty magazines
around the world, and it was featured in several movies, over
twenty-five TV shows, and on YouTube.
• Montgomery and his team at PowerSki enjoyed taking their well-
deserved bows for the job they did designing the product, but
having a product was only the beginning for the company.
• The next step was developing a system that would produce high-
quality Jetboards at reasonable prices. Before putting this system
in place, PowerSki managers had to address several questions.
• What kind of production process should they use to make the
Jetboards?
• How large should their production facilities be, and where
should they be located?
• Where should they buy needed materials?
• What systems will be needed to control the production process
and ensure a quality product?
• Answering these and other questions helped PowerSki set
up a manufacturing system through which it could
accomplish the most important task that it had set for itself:
efficiently producing quality Jetboards.
Operations Management in Manufacturing

• Like PowerSki, every organization—whether it produces goods or provides services—

sees Job 1 as furnishing customers with quality products.
• Thus, to compete with other organizations, a company must convert resources
(materials, labor, money, information) into goods or services as efficiently as possible.
• The upper-level manager who directs this transformation process is called an
operations manager.
• The job of operations manager(OM) consists of all the activities involved in
transforming a product idea into a finished product.
• In addition, operations managers are involved in planning and controlling the systems
that produce goods and services. In other words, operations managers manage the
process that transforms inputs into outputs.
• Like PowerSki, all manufacturers set out to perform the same basic function: to transform
resources into finished goods. To perform this function in today’s business environment,
manufacturers must continually strive to improve operational efficiency.
• They must fine-tune their production processes to focus on quality, to hold down the
costs of materials and labor, and to eliminate all costs that add no value to the finished
product. Making the decisions involved in the effort to attain these goals is another job of
operations managers. Their responsibilities can be grouped as follows:
• Production planning. During production planning, managers determine how goods will be
produced, where production will take place, and how manufacturing facilities will be laid
out.
• Production control. Once the production process is under way, managers must
continually schedule and monitor the activities that make up that process. They must
solicit and respond to feedback and make adjustments where needed. At this stage, they
also oversee the purchasing of raw materials and the handling of inventories.
• Quality control. The operations manager is directly involved in efforts to ensure that
goods are produced according to specifications and that quality standards are maintained.
• Operations Planning as Service Industry
• When starting or expanding operations, businesses in
the service sector must make a number of decisions
quite similar to those made by manufacturers:
• What services (and perhaps what goods) should they
offer?
• Where will they locate their business, and what will
their facilities look like?
• How will they forecast demand for their services?
Examples of Logistics
Operation Flow
Organizing to Produce Goods and
Services

• Essential functions:
• Marketing – generates demand
• Production/operations – creates the
product
• Finance/accounting – tracks how well the
organization is doing, pays bills, collects
the money

1 – 32
Organizational Charts
Commercial Bank

Operations Finance Marketing

Teller Investments Loans
Scheduling Security Commercial
Check Clearing Real estate Industrial
Collection Financial
Transaction Accounting Personal
processing
Facilities Mortgage
design/
layout Auditing
Vault operations Trust Department
Maintenance
Security
1 – 33
 Organizational Charts
Airline

Operations Finance/ Marketing

Ground support accounting Traffic
equipment Accounting administration
Maintenance Payables Reservations
Ground Operations Receivabl Schedules
es Tariffs (pricing)
Facility General
maintenance Sales
Ledger
Catering Advertising
Finance
Flight
Operations Cash control
Crew scheduling International
Flying exchange
Communications
Dispatching
Management
1 – 13
 Organizational Charts
Manufacturing

Operations Finance/ Marketing

Facilities accounting Sales
Construction; maintenance Disbursemen promotion
Production and inventory control ts/ Advertising
Scheduling; materials control credits Sales
Quality assurance and control Receivables Market
Supply-chain management Payables research
General ledger
Manufacturing Funds
Tooling; fabrication; assembly
Management
Design
Product development and design Money market
Detailed product specifications International
Industrial engineering exchange
Efficient use of machines, space, Capital
and personnel requirements
Process analysis
Development and installation of
Stock issue
production tools and equipment Bond
issue and
recall
Why Study OM?
 OM is one of three major functions (marketing,
finance, and operations) of any organization
• We want (and need) to know how
goods and services are
produced
• We want to understand what
operations managers do
• OM is such a costly part of an
organization
1 – 36
Options for
Increasing
Contribution
Finance/
Marketing Accounting OM
Option Option Option
Increase Reduce Reduce
Sales Finance Production
Current Costs 50% Costs 20%
Sales $100,000
Revenue 50% $150,000 $100,000 $100,000
Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500

1 – 37
 Ten Critical Decisions
• Service and product design
• Quality management
• Process and capacity design
• Location
• Layout design
• Human resources, job design
• Supply-chain management
• Inventory management
• Scheduling
• Maintenance
The Critical Decisions
 Service and product design
 What good or service should we offer?
 How should we design these products and services?
 Quality management
 How do we define quality?
 Who is responsible for quality?
The Critical Decisions
 Process and capacity design
 What process and what capacity will these products
require?
 What equipment and technology is necessary for
these processes?
 Location
 Where should we put the facility?
 On what criteria should we base the location
decision?
The Critical Decisions
 Layout design
 How should we arrange the facility and material
flow?
 How large must the facility be to meet our
plan?
 Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our employees to
produce?
 The Critical Decisions
 Supply-chain management
 Should we make or buy this component?
 Who are our suppliers and who can integrate into our e-
commerce program?
 Inventory, material requirements planning, and JIT
 How much inventory of each item should we have?
 When do we re-order?
The Critical Decisions
 Intermediate and short–term scheduling
 Are we better off keeping people on the payroll
during slowdowns?
 Which jobs do we perform next?
 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?
Where are the OM Jobs?
• https://www.google.com/search?client=firefox-b-
e&q=operations+manager+jobs+in+India&ibp=htl;jobs&sa=X&ved=2ahU
KEwj8mZfal8ruAhWL7HMBHbWrCK4QudcGKAJ6BAgCECg&sxsrf=ALeKk0
2aP_VHeppD6cOcCsSfZYMqijHFJA:1612234006849#htivrt=jobs&htidocid
=TFzjpouunP_TJVjcAAAAAA%3D%3D&fpstate=tldetail
Where are the OM Jobs?
• Technology/methods
• Facilities/space utilization
• Strategic issues
• Response time
• People/team development
• Customer service
• Quality
• Cost reduction
• Inventory reduction
• Productivity improvement

1 – 46
George Santayana: “To know your future you
must know your past”
• The present position where the operations management
finds itself today has gone through a large number of
stages.
• Although the history of operations management is not very
old—the roots of this type of management can be easily
linked with the concept which deals with the phenomenon
of division of labor.
• This concept was given by Adam Smith in his
very famous book ‘The Wealth of Nations’ in
1776.
• Experts in the field, from the time of Adam Smith and F.W.
Taylor, leading to Dodge and Tippet, have contributed to the
important present status of operations management in
today’s world.
Significant Events in OM

Figure 1.3

1 – 48
EVOLUTION with Industrial REVOLUTION

 Began in the 1770s in England and

spread  to the rest of Europe and to the
United  States during the 19th century.
 Substituted machine power for
human  power.
 Most significant machine was steam
engine.
 Maudslay’s Screw Cutting Lathe from
Mechanization in Industries
 Spinning Jenny and Cateright’s
• Who invented Steam Engine?
•
• Who invented Steam Engine?
• - James Watt
What did take place
 Production became fast and low costly one

 Economies of scale

 Development of standard gauging

system
 Factories grew rapidly

 Provided countless jobs

The Heritage of OM
• Division of labor (Adam Smith 1776;
Charles Babbage 1852)
• Standardized parts (Whitney 1800)
• Scientific Management (Taylor 1881)
• Coordinated assembly line (Ford/
Sorenson/Avery 1913)
• Gantt charts (Gantt 1916)
• Motion study (Frank and Lillian Gilbreth
1922)
• Quality control (Shewhart 1924; Deming
1950)
1 – 53
The Heritage of OM
• Computer (Atanasoff 1938)
• CPM/PERT (DuPont 1957)
• Material requirements planning (Orlicky 1960)
• Computer aided design (CAD 1970)
• Flexible manufacturing system (FMS 1975)
• Baldrige Quality Awards (1980)
• Computer integrated manufacturing (1990)
• Globalization (1992)
• Internet (1995)
• Current- Digitalization, Information and
communication, Quality, Green Operations 1 – 54
Adam Smith- Division of Labor
• Adam Smith was a Scottish economist, philosopher as well as a moral philosopher, a pioneer of
political economy, and a key figure during the Scottish Enlightenment, also known as ''The
Father of Economics'’ or ''The Father of Capitalism''.

• Smith wrote two classic works, The Theory of Moral Sentiments (1759) and

• An Inquiry into the Nature and Causes of the Wealth of Nations (1776).

• The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the
first modern work of economics.
 Concept of division of labor, which Adam Smith wrote
about in the wealth of Nations (1776) was used by Ford.
 An operation is divided up in to a series of many small
tasks, individual workers are assigned to one of those
tasks.
Benefits

• Workmen performing work in repetition develop higher skill

• Saving in time
• Improvement in production methods result when workers are made
to specialize on certain tasks

• Charles Babbage gave the forth advantage of Division of Labor called

Specialization giving rise to cost cutting through better managerial
and organizational structures, human relations, product development
and management accountability through Profit/Volume (P/ V)
relationship.
 Division of Labor

• https://www.youtube.com/watch?v=ZtWkGfKhsG8
 Eli Whitney

• Born 1765; died 1825

• In 1798, received government contract to make 10,000 muskets

• Showed that machine tools could make standardized parts to

exact specifications

• – Musket parts could be used in any musket

• Fact- Invented Cotton Gin machine

• https://www.youtube.com/watch?v=sLb9QGWK8TA
 Frederick Winslow Taylor

• Father of Scientific Management

• His pioneering work in applying engineering
principles to the work done on the factory floor was
instrumental in the creation and development of
the branch of engineering that is now known as
industrial engineering.
• Taylor made his name, and was most proud of his
work, in scientific management; however, he made
his fortune patenting steel-process improvements.
• Taylor was also an athlete who competed
nationally in tennis.
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
1 – 63
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

1 – 64
• Today, an updated version of his original theory is used by such companies as FedEx and
Amazon.
• Digital Taylorism is based on maximizing efficiency by standardizing the tools and
techniques for completing each task involved with a given job.
• Every task is broken down to the smallest motion and translated into an exact procedure
that must be followed to complete that task. 
• Because everyone is operating in the same mechanistic way, it increases predictability
and consistency while reducing errors.
• It is relatively easy for managers to replace workers and retain the same productivity.
The criticism of this type of management approach is similar to that of Taylor’s original
theory: It reduces worker creativity; it requires management to monitor all aspects of
employee behavior; and it is unforgiving to workers who don’t meet the standard.
Frank and Lillian Gilbreth
Frank & Lillian Gilbreth
• Frank (1868-1924); Lillian (1878-
1972)
• Husband-and-wife engineering team
• Further developed work
measurement methods
• Applied efficiency methods to their
home and 12 children!
• Book & Movie: “Cheaper by the
Dozen,” book: “Bells on Their Toes”
1 – 68
• Taylor and the Gilbreths belonged to the classical school of management, which
emphasized increasing worker productivity by scientific analysis.

• They differed, however, on the importance of the worker. Taylor’s emphasis was on
profitability and productivity; the Gilbreths were also focused on worker welfare and
motivation.

• They believed that by reducing the amount of motions associated with a particular task,
they could also increase the worker’s well-being.
• Their research, along with Taylor’s, provided many important principles later incorporated
into quality assurance and quality control programs begun in the 1920s and 1930s.

• Eventually, their work led to the science of ergonomics and industrial psychology.
(Ergonomics is the study of people in their operating environment, with the goal of
increasing productivity and reducing risk of work-related injury.)
• https://www.youtube.com/watch?v=lDg9REgkCQk
 Henry Ford- Game Changer of
Automobile World
• https://www.youtube.com/watch?v=f5_mQpR2_Uo

• https://www.youtube.com/watch?v=gglrbduPbQ0
Henry Ford
• Born 1863; died 1947
• In 1903, created Ford Motor
Company
• In 1913, first used moving assembly
line to make Model T
– Unfinished product moved by
conveyor past work station
• Paid workers very well for 1911
($5/day!)
1 – 73
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
1 – 74
SCIENTIFIC MANAGEMENT
 Widely changed the management of factories.
 Developed by Frederick Winslow Taylor, the
father of scientific management.
 Based on observation, measurement,
analysis and improvement of work methods
and economic incentives.
 Studied to identify the best method for doing
each job.
Cont….
 Henry Ford practically adopted the scientific management
principles for Taylor.
 Introduced the moving assembly line, which affected
to many industries.
 Introduced mass production to the automotive industry.
 The concept of “Interchangeable Parts” was applied by Eli
Whitney, an American inventor.
 The basis for interchangeable parts was to
standardize parts.
 Any part in a batch of parts would fit any automobile coming
down the assembly line.
 Result was a high decrease in assembly time and cost.
Henry Gantt - recognized the value of nonmonetary
rewards to motivate workers, and developed a widely
used system for scheduling, called Gantt charts.
 Harrington Emerson - applied Taylor’s ideas to
organization structure and encouraged the use of
experts to improve organizational efficiency. He
testified in a congressional hearing that railroads
could save a million dollars a day by applying
principles of scientific management.
DECISION MODELS AND MANAGEMENT SCIENCE

Accompanied by the development of several

quantitative techniques.
 F.W. Harris developed a mathematical model for
inventory order size in 1915.
 H.F. Dodge, H.G. Romig and W. Shewhart
developed statistical procedures for sampling and
quality control in 1930.
 L.H.C. Tippett conducted studies that provided the
groundwork for statistical sampling theory In
1935.
 Those qualitative models were widely used in world war
2.
 These decision models were also used for forecasting,
inventory management, project management and other
areas of operations management
THE INFLUENCE OF JAPANESE MANUFACTURERS

 Japanese manufactures developed management

practices that increased the productivity and quality.
 Companies which were outside Japan was
interested in their approaches.
 The influence of Japanese companies is
continuing
for the foreseeable future.
Contributions From
 Human factors
 Industrial engineering
 Management science
 Biological science
 Physical sciences
 Information science

1 – 85
 New Challenges in OM
From To
 Local or national focus  Global focus
 Batch shipments  Just-in-time
 Low bid purchasing  Supply chain
partnering
 Lengthy product  Rapid product
development development,
alliances
 Standard products  Mass
customization
 Job specialization  Empowered
employees,
teams 1 – 86
Characteristics of Goods
• Tangible product
• Consistent product
definition
• Production usually
separate from
consumption
• Can be inventoried
• Low customer
interaction

1 – 87
Characteristics of Service
• Intangible product
• Produced and
consumed at same time
• Often unique
• High customer
interaction
• Inconsistent product
definition
• Often knowledge-
based
• Frequently 1 – 88
 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 1 – 40
Goods and Services
Automobile
Computer
Installed
carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising
agency/
investment
management
Consulting service/
100% 75 50 25 0 25 teaching
50 75 100%
| | | | | | | | |

Percent of Product that is a Good Counseling

Percent of Product that is a Service

1 – 90
New Trends in OM
Past Causes Future
Local or Low-cost, reliable Global focus
worldwide communication
national and transportation
focus networks

Batch (large) Short product life cycles Just-in-time

shipments and cost of capital put shipments
pressure on reducing
inventory
Low-bid Quality emphasis requires Supply-
purchasing that suppliers be chain
engaged in product partners,
improvement Enterprise
Resource
Planning,
e-
commerce
New Trends in OM
Past Causes Future
Lengthy Shorter life cycles, Rapid product
product Internet, rapid international development,
development communication, alliances,
computer- aided design, collaborative
and international designs
collaboration
Standardized Affluence and worldwide Mass
products markets; increasingly customization
flexible production with added
processes emphasis on
quality
Job Changing socioculture Empowered
specialization milieu; increasingly a employees,
knowledge and information teams, and
society lean
production

1 – 92
New Trends in OM
Past Causes Future
Low-cost Environmental issues, ISO Environmentally
focus 14000, increasing sensitive
disposal costs production,
green
manufacturing,
recycled
materials,
remanufacturing

Figure 1.6
1 – 93
Operations Strategy
Gaining Competitive Leverage
 Operations Strategy
• OS – is setting broad policies and plans for using resources of the firms in
operations processes to best support its long term competitive strategy.
Operations Strategies Examples
 Current issues
• Coordinating operations which mutually supportive, but functions as
separate.
• Optimizing global supplier, producer and distribution network.
• Increased co-production of goods & services.
• Managing customer touch points.
• Raising senior level management’s awareness on operation’s
significance as competitive weapon.
 Competitiveness – OM Dimensions
• Cost or Price – make the product & deliver the services at cheaper
cost
• Quality- greater quality products & greater quality services
• Flexibility – variety or wide portfolio, rate of new production
introduction
• Delivery - Speed (quickly), Demand (changes in volume) &
Reliability (deliver when it promised)
• Other support services – technical liaison support, meeting launch
date (projects), after sales support & other dimensions.
 Competing on Cost?-Xiomi Mobile

• Offering product at a low price relative to competition

• Typically high volume products
• Often limit product range & offer little customization
• May invest in automation to reduce unit costs
• Can use lower skill labor
• Probably use product focused layouts
• Low cost does not mean low quality
 Activity: 1.1
Identify “5 goods and 5 services” examples
of the given below table.
(Sl. No 0 has been given as sample answer).

Sl.No Industry / Domain / Input Throughput Output

Topic
0 Biscuit Wheat flour Mixing, forming, baking and Salt Biscuits,
Sugar, Salt cooling Sweet Biscuits,
Dry fruits, Milk & Sweet & Salt Biscuits
Water , other ingredients

1 Goods
2 Goods
3 Goods
4 Goods
5 Goods
6 Services
7 Services
8 Services
9 Services
10 Services
Operations Management
Books for Reference
1. Heizer / Render -Principles of Operations Management, 6e
Operations Management, 8e ( Prentice Hall Publication)
2. Operations Management by Norman Gaither & Greg Frazier (
Cengage Learning Publication)
3. Operations Management – B Mahadevan ( Pearson
Publication)
4. Production & Operations Management - Everett E
Adam, Jr Ronald J Ebert. ( PHI Publication)

Text Book
Dan Reid R. Sanders Nada, Operations Management – An
Integrated Approach

1 – 101