Dr.

Reem Aboualnile
Stevenson Tenth Edition
Chapter 1: Introduction to operations Management
Chapter 2:Competitiveness,Strategy. And Productivity
Chapter 3:Forecasting
Chapter 17:Project Management
 Operational Management (OM)
Production: is the creation of goods and services
OM is the set of activities that creates value in the form of
goods and services by transforming inputs into outputs
Goods:
Physical items produced by business organizations
Services:
Activities that provide some combination of time ,location,
form and psychological value
 organization

Finance Operations Marketing

Fig1.1The three basic functions of business organization

suppliers Final
producer Distributor
customers

Fig1.2 A simple product supply chain

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, collect the
money.
The operations function involves the
conversion of inputs into outputs

Inputs
Land Transformation Outputs
Labor Conversion Goods
Capital Process Services
Information
Feed
back
Feed back Feed back
Control
Why study OM
1-OM is one of three major functions(marketing,
finance, and operations)of any organization.
2-We want (and need)to know how goods and
services are produced .
3-We want to understand what operations managers
do.
4-OM is such a costly part of an organization.
Product life Cycle Stages
 1-Introduction stage: It is the most
expensive for a company launch a new
product , the size of the market is small,
sales are low .
 In the other hand , the cost of research and

development ,consumer testing, and the

marketing needed to launch the production
can be very high, especially if it’s competitive
sector.
2-Growth stage : It is typically characterized by
a strong growth in sales and profits , this
makes it possible for business to invest more
money in the promotional activity to
maximize the potential of this growth stage.

3-Maturity stage: During this stage ,product is

established and the aim of the manufacturer
is to maintain the market share they have
built up.
 Decline stage: Eventually, the market for a product will
start to shrink.

 It could be due to the market becoming saturated, i.e:

all the customer who will buy the product have already
purchased it or because the consumers are switching to
different type of product

 It may be possible to companies to make some profit

by switching to less expensive production methods and
cheaper markets
Modern trends in operations and production
management
 Operations management is the process in which
resources/inputs are converted into more useful
products.
Some Of The Recent Trends Are:
1- Flexibility: The ability to adapt quickly to changes
in volumes of demand, in the product mix demanded,
and in product design or delivery schedules, has
become a major competitive strategy and a
competitive advantage to the firms.
2-Total Quality Management: TQM approach has been
adopted by many firms to achieve customer satisfaction by
a never ending quest for improving the quality of goods
and services.
 
3-Time Reduction: Reduction of manufacturing cycle time
and speed to marker for a new product provide a
competitive edge to a firm over other firms. When
companies can provide products at the same price and
quality, quicker delivery (short lead time) provide one firm
competitive edge over the other.
4-Worker Involvement: is to assign responsibility for
decision making and problem solving to the lower
levels in the organization. This is known as employee
involvement and empowerment. Examples of
employees empowerment are quality circle and use of
work teams or quality improvement teams.
 
5-Business Process Re-engineering: BPR involves
drastic measures or break-through improvements to
improve the performance of a firm. It involves the
concept of clean-state approach or starting from a
scratch in redesigning in business processes.
  
6-Operations Strategy: More and more firms are
recognizing the importance of operations strategy for
the overall success of their business and the necessity
for relating it to their overall business strategy.

7-Global Market Place: Globalization of business has

compelled many manufacturing firms to gave
operations in many countries where they have certain
economic advantage. This has resulted in a steep
increase in the level of competition among
manufacturing firms throughout the world.
 
8-Lean production: Production system have become
lean production systems which have minimal amount
of resources to produce a high volume of high quality
goods with some variety.
These systems use flexible manufacturing systems and
multi-skilled workforce to have advantages of both
mass production and job production.
 Six Sigma: A process for reducing costs, improving

quality, and increasing customer satisfaction

 Lead time : The time between ordering a good or

service and receiving it.

 9-Just in time production:
It is a pull system of production , so actual orders provide a
signal for when a product should be manufactured. Demand-pull
enables a firm to produce only what is required, in the correct
quantity and at the correct time. This means that stock levels of
raw materials, components, work in progress and finished goods
can be kept to a minimum. This requires a carefully planned
scheduling and flow of resources through the production
process.
 Supply Chain: is a sequence of activities and
organizations involved in producing and delivering a
good or service
 E-Supply Chain Management: Supply chain

management is the management of supply chain from

suppliers to final customers reduces the cost of
transportation, warehousing and distribution through
out the supply chain. But SCM was a traditional
concept which is now being replaced .
 Value-added

The difference between the cost of inputs and the value or

price of outputs.
Environmental Issues: 
 Today’s production managers are concerned

more and more with pollution control and

waste disposal which are key issues in
protection of environment and social
responsibility.
 There is increasing emphasis on reducing

waste, recycling waste, using less-toxic

chemicals .
Ten strategic Management Decisions
1-Design of goods and services
2-Managing quality
3-Process and capacity design(the process for
production)
4-Location strategy
5-Layout strategy: requires integrating capacity
needs, personnel levels, technology, and
inventory requirements to determine the efficient
flow of material , people and information
6-Human resource and job design
7-Supply chain management
8-Inventory management
9-Schaduling
10- Maintenance
Key Decisions of operations
Managers
 What
What resources /What amount
 When

Needed/scheduled/ordered
 Where

Work to be done
 How

Designed
 Who-To do the work
 Models
A model is an abstraction of reality, a simplified
representation of something.
Managers use models in a variety of reasons.
1-Are generally easy to use and less expensive
2-Require users to organize and sometimes
quantify information
3-Increase understanding of the problem.
4-Enable managers to analyze “What if”?
 There are three of the more important
limitions:
1-Quantitative information may be emphasized
at the expense of qualitative information .
2-Models may be incorrectly applied and the
results misinterpreted.
3-The use of models does not guarantee good
decisions.
 Historical Evolution of operation Management
 Craft production: System in which highly

skilled workers use simple, flexible tools to

produce small quantities of customized
goods.
 Mass production: A system in which low

skilled workers use specialized machinery to

produce high volumes of standardized goods.
 Interchangeable parts:

Parts of a product made to such that they do

not have to be custom fitted
 The Division of Labor:
The breaking up of a production process into
small tasks , so that each worker performs a
small portion of the overall job.
Objectives of production Management
 The objective of the production management is to
produce goods services of right quality and quantity
at the right time and right manufacturing cost
 1-Right Quality: The quality of product is

established based upon the customers needs. The

right quality is not necessarily best quality. It is
determined by the cost of the product and the
technical characteristics as suited to specific
requirements
2-Right Quantity: The manufacturing organization
should produce the products in right If they are
produced in excess of demand the capital will block up
in the form of inventory and if the quantity is produced
in short of demand, leads to shortage of products.
3-Right Time: Timelines of delivery is one of the
important parameter to judge the effectiveness of
production department. So, the production department
has to make the optimal utilization of input resources
to achieve its objective.
 4-Right Manufacturing cost: Manufacturing costs are
established before the product is actually
manufactured. Hence, all attempts should be made to
produce the products at pre-established cost, so as to
reduce the variation between actual and the
standard(pre-established)cost
Establishing priorities
 Pareto phenomenon:
A few factors account for a high percentage of
the occurrence of some events.
 Sustainability: Using resources in ways that
do not harm ecological system that support
human existence
 Agility :The Ability of an organization to

respond quickly to demand or opportunities.

 Outsourcing : Buying goods or services

instead of producing or providing them in

house.
Chapter 2
Competitiveness, Strategy , and
productivity
 This chapter discusses competitiveness, strategy
and productivity…three separate but related topics
that are vitally important to business organizations.
 Companies must be competitive in its chosen
markets…Competitive advantage…to sell their
goods/services in the marketplace .
 Business organizations compete through some
combination of their marketing and operations
functions
-Competitiveness
 It is how effectively an organization meets the

wants and needs of customers relative to

others that offer similar goods or services.
Strategy
 It is the direction and scope of an
organization over the long-term to get an
advantage through using available
resources to meet the needs of markets and
to fulfill stakeholder expectation.
 Productivity: relates to the effective use of

resources and it has a direct impact on

competitiveness.
Marketing influences competitiveness in several ways
including :
 Identifying wants and needs a basic input in an

organization decision making process.

 Pricing…a key factor in a consumer buying

decision…it is important to understand the tradeoff

between price and other aspects of a product or
service from the customer perspective.
 Advertising and promotion to communicate with

potential customers and publicize the customer

priorities that the product will satisfy.
 Operations...influence competitiveness through:
 Product and service design
 special features
 Cost…
 productivity improvement
 Location…affects cost and convenience.
 Quality…in terms of how customers think of a
product/service satisfy its intended purpose.
 Quick response…including quickly handling
complaints.
 internal and external relationships .
Businesses Compete Using Marketing

 
 Identifying consumer wants and needs
 Pricing
 Advertising and promotion
 Competitiveness, Strategy, and Productivity

 
Businesses Compete Using
Operations
Flexibility
 Inventory management
Supply chain management
Service
Managers & workers
Why some organizations fail
Organizations fail, or perform poorly, for a
variety of reasons.
1-Neglecting operations strategy
2-Failing to take advantage of strengths and
opportunities, and failing to recognize
competitive threats.
3-Putting too much emphasis on short-term
financial performance at the expense of
research and development.
4-Placing too much emphasis on product and service
design and not enough on process design and
improvement.
5-Neglecting investments in capital and human
resources.
6-Failing to establish good internal communications
and cooperation among different functional areas.
7-Failing to consider customer wants and needs.
Mission and Strategies
 Mission: The reason for the existence of an
organization
 Mission statement: States the purpose of an

organization
 Strategies: Plans for achieving organizational goals
 Goals: Provide detail and scope of the mission
 Strategies :Plans for achieving organizational goals
 Tactics: The methods and actions taken to

accomplish strategies.
SWOT analysis

Strength Weakness

Opportunitie Threats
s
 To formulate an effective strategy ,senior managers
must take into account the core competencies of the
organizations, and they must scan the environment.

 Strengths and weakness have an internal focus and

are typically evaluated by operations people.
Quality and Time Strategies
 Operations strategy:
The approach consistent with the organization
strategy, that is used to guide the operations
function.
 Quality-based strategy:

Strategy that focuses on quality in all phases of

an organization.
 Time –based strategy: Strategy that focuses on

reduction of time needed to accomplish tasks.

Core competencies
The special attributes or abilities that give an
organization a competitive edge.

Environmental scanning
The considering of events and trends that
present threats or opportunities for a company
Productivity
 A measure of the effective use of resources ,
usually expressed as the ratio of output to
input.
Productivity =Output
Input

Productivity growth =Current productivity – Previous productivity Previous

 productivity x100
 Productivity:
It is the ratio of output (goods and services) divided
by the inputs(resources such as labor and capital).
 The objective is to improve this measure of

efficiency.
 Production is a measure of output only and not a

measure of efficiency.
 It measures the process improvement.
 Represent output relative to input.

 Only through productivity increase can our

standard of living.
Labor productivity
 Productivity=Units produced/Labor-hours
used
 Multi-factor productivity

Productivity= output
-----------------------
labor+ Material +Energy + capital + Miscellaneous
 Also known as total factor productivity
New challenges in operations Management

 From To
-Local or national focus - Global Focus

-Batch shipment - JIT

-Low bid purchasing - Supply chain partnering

-Standard products -Mass customization

-Job specification -Empowered employees, teams

Quality Control
 The word quality does not mean the quality of
manufactured product only. It may refer to the quality
of the process (i.e. , men, material, and machines) and
even that of management.
 Crosby defined as “Quality is conformance to

requirement or specification”.
 Juran defined as “Quality is fitness for use” The

quality of a product or service is the fitness of that

product or service for meeting or exceeding its
intended use as required by the customer.
Fundamental Factors Affecting Quality
 The nine fundamental factors(9M’s)
1-Market
2-Money
3-Management
4-Men
5-Motivation
6-Materials
7-Machines and mechanization
8-Modern information methods
9-Mounting product requirements
Steps in Quality Control
1-Formulate quality policy
2-Set the standards or specifications on the basis of
customer’s preference, cost and profit
3-Select inspection plan and set up procedure for
checking
4-Detect deviations from set standards of specifications
5-Take corrective actions or necessary changes to
achieve standards.
6- Decide on salvage method i.e. to decide how the
defective parts are disposed of, entire scrap or
rework
7-Coordination of quality problems.
8-Developing quality consciousness both within and
outside the organization
Benefits of TQM
 The benefits of TQM can be classified into the
following two categories:
1. Customer satisfaction oriented benefits
2. Economic improvements oriented benefits
Benefits of TQM
 The benefits of TQM can be classified into the following
two categories:
1-Customer satisfaction oriented benefits
2-Economic improvements oriented benefits
1-Customer satisfaction oriented benefits: The benefits
under this category are listed below:
a) Improvement in product quality
b) Improvement in product design
c)Improvement in production flow
d)Improvement in employee morale and quality
consciousness
 Improvement of product service
 Improvement in market place acceptance

2-Economic improvements oriented benefits:

The benefits under this category are as follows:
a)Reduction in operating costs
b)Reduction in operating losses
c)Reduction in field service costs
d)Reduction in liability exposure
A systems approach
It is a set of interrelated parts that must work
together
Establishing priorities; In virtually every
situation ,managers discover that certain
issues or items are more important than other .
Recognizing this enables the managers to direct
their efforts to where they will do the most
good
Ethics
Operation manager ,likes all managers ,have
the responsibility to make ethical decision
ethical issues arise in many aspects of
operations .
Management , including;
- Financial statements ;accurately representing
the organization’s financial condition
-Worker safety :providing adequate training.
Ethics
 These dynamics present a variety of
challenges that come from the conflicting
perspectives of stakeholders.
 Stakeholders: Those with a visited interest in

an operation ,including customers,

distributors, supplies, owners , lenders,
employees, and community members.
Challenge facing operations managers:
-Developing safe quality products
-Maintaining a clean environment
-Providing a safe workplace
-Honoring community commitments