chapter 9

MANAGING THE OPERATIONS FUNCTIONS

Presented by: Adiong, Noralyn l.

H,Ali, Johanisa A,
 INTRODUCTIO CONCEPT OF ASSESSING FRAMEWORK
N OPERATION THE FOR ANALYZING
MANANGEMENT PERFOMANCE THE OPERATIONS
CONTEN OF A BUSINESS
ENTERPRISE
OF AN
ENTERPRISE
TS

VALUE CHAIN MEASUSRE OF WAYS OF BALANCED

APPROACH PRODUCTIVITY IMPROVING FIRM’S SCORE-
PRODUCTIVITY BOARD- A WAY
OF RECKONING
EFFECTIVENESS
INTRODUCTION
• Managing the operations of an enterprise is a
major component in the implementation of the
business plan.

• This chapter will cover various themes,

including the concept of operations
management, the bases for evaluating the
performance of a firm, various approaches in
analzying the operation of firm and alternative
of firm’s performance.
 CONCEPT OF OPERATIONS
MANANGEMENT
• Operation management -is a component
of management that deals with planning,
implementing, and monitoring of the
process of producing goods and services.
• The task of operations manager is to
oversee the resources available to the
enterprise for production activities.
• An operations management plans the
structure of production by identifying the
output to be produced , the resources
needed, and the procedures on how these
resources are mixed to produce a good
services.
The managers assesses the performance of
the production in term of:

a)Effectivenesss
b)Efficiency
c)Quality
d)Timeless
e)Dependability
f)Flexibility
g)cost
and other criteria
This Warehousing
related • Inventory management -
activities Maintenance is also crucial in
include, narrowing the gap
between the proximate
among: Inventory future demand and the
next production round.
Quality Control
 ASSESSING THE
• Since a significant component of operations PERFORMANCE OF A
management of a business enterprise involves the
process of production, the success of a firm is BUSINESS ENTERPRISE
assessed based on its performance.

 There are two levels in evaluating the performance of a

business:

PERFORMANCE PERFOMAN
EFFECTIVENESS02 CE
EFFICIENCY
  Performance effectiveness.- Effectiveness indicates
how the output of the firm was able to achieve the
objectives set by the business enterprise.
PERFORMAN  A business firm is considered effective if it is able to
CE produce the goods and services that it has planned to
EFFECTIVEN produce.
ESS  Meanwhile, performance effectiveness can also be
assessed in terms of quality ,speed, dependability,
and flexibility.
 • In terms of quality the product has fulfilled the minimum
requirements set by the market and regulatory bodies.

• Speed, on the other hand, refers to the punctual delivery of

the product to its customers.
QUALITY
• Dependability is the consistency and reliability of the
SPEED
DEPENDABILI product over several production runs
TY
FLEXIBILITY • Flexibility is the adaptability of the operations of the
company to changing market environments.
  Performance efficiency. The concept of efficiency denotes how
the output of the firm was realized through the use of resources

• The good or service produced by the firm may be effective since it

has addressed the intent of the entrepreneur, the demand of the
PERFORMAN customers and other criteria of effectiveness
CE
EFFICIENCY
 FRAMEWORK FOR ANALYZING THE
OPERATIONS OF AN ENTERPRISE

• In order to properly assess the performance of

an enterprises necessary to understand how
the production is structured. There are two
ways so understanding how the operations
proceeds in an enterprise in an enterprise- the
system approach and the value chain
approach.
 SYSTEMS APPROACH: INPUT-PROCESS-
OUTPUT (IPD) FRAMEWORK

• There are three major components in this production

relationship: inputs, process, and outputs. :

• This production relationship is called the Input-Process-

Output (IPO) framework. The firm will need several
inputs for its operations. These inputs, in turn, have to
be processed by technology and other transforming
inputs to produce a final output.

• Resource Inputs (5Ms). The first component of IPO

framework is the resource inputs used in the production
process.
 These are known as the 5Ms representing materials, manpower, machinery, methods,
and money

Materials are semi Manpower is the Machinery Method denotes the Money is a
processed goods that human resource represents all man- process of combining financial resource
will be subjected to input used in the made physical raw materials and how used to purchase all
further transformation production process. capital used in the these are going to be the resources
in the production production process. transformed using the needed by the firm
process. other factor inputs of for its operations.
production.
 In the economic analysis of production, the resource inputs mentioned
above are grouped into two major categories intermediate inputs and
factor inputs.

• Intermediate inputs are semi processed materials that

need further transformation to produce a finished product.
They are also called raw materials or materials as
classified in the IPO framework.

• Factor inputs are the transforming inputs that will process

the intermediate inputs into finished products. Because of
their transforming properties these inputs are also called
productive inputs. Factor inputs include labor (manpower),
capital (machinery), land, and technology (method).
 PROCES
S

The second component of the IPO framework is the

process involved in production.

• Process refers to the various forms of transformation

that factor inputs perform on the materials. The
process is determined by the type of commodity to
be produced and the technology being used in
production. The various forms of transformation are
as follows
 Physical transformation
occurs when the processing of
raw materials convert them
into significantly altered new
product.
Locational transformation
arises when a product changes
its location through various
means of transportation and
communication

Information transformation
happens when knowledge and
specialized skills of providers
are transmitted to their
customers.
Exchange transformation
takes place when a commodity
is transmitted from the supplier
to its buyer
Extractive transformation
happens when a natural
resource is taken out from its
habitat
 OUTPUT

• The third component in the IPO framework is the

output, which refers to the result of the production
process. It can be considered the most component in
the IPO framework since the goal of production is the
realization of an output.
• The output can be processed goods or services and
are influenced by the process of transformation
food grains Canned Foods Clothes Breads

Electronic
Gadgets

furniture Gasoline Construction Cars

Materials

OUTPUT FROM THE PHYSICAL

TRANSFORMATON
Taxi Services Bus Services Train Services Sea Services

Air Services Postal Services Telephone Services

OUTPUTS FROM LOCATIONAL

TRANSFORMATION
Educational Services Health Services Legal Services

Consultancy Services Auditing Services

OUTPUTS FROM INFORMATION

TRANSFORMATION
Sari-sari store Groceries Supermarket

Depertmen store Wholesale services

OUTPUTS
OUTPUTSFROM
FROMLOCATIONAL
EXCHANGE
TRANSFORMATION
Gold ores Copper ores Timber

logs Sand Seafood

OUTPUTS FROM EXTRACTIVE

 VALUE CHAIN APPROACH

• Aside from the systems approach such as the IPO framework,

the process of production can also utilize the value chair
approach The the process chance approach traces the value of
a commodity in terms on how factor input adding value to the
raw materials.
• The cost of processing, in turn, consists of the various costs of
transforming inputs. Thus, the value-added is the summation of
wages (cost of labor), interest (cost of capital), rent (cost of
land), royalty (cost of technology), and profit (return to
entrepreneur). On the other hand, the value of production is
computed as the value of raw materials and the value-added by
the factor inputs.
 Grain Wheat Galapong Bibingka
A B A B A B A B

Grain Value of Grain

Value of Wheat

Value of Galapong

D C D C
Value-Added

E F E F
Value-Added

G H G H
Value- Added

I J
 MEASURES OF
PRODUCTIVITY

Average productivity of labor: Value of total production per

unit of labor input

Average productivity of capital: Value of total production per

unit of capital input

Marginal productivity of labor: Additional output per

additional unit of labor input

Marginal productivity of capital: Additional output per

additional unit or of capital input
 Some measure of cost are the following:

Average cost: Marginal cost:

Total cost Additional

of cost of
production
productio
per
n per unit additional
of output unit of
production
 WAYS OF IMPROVING FIRM’S
PRODUCTIVITY

• Based on the indicator of productivity a firm can

improve its employing factor inputs that are output
enhancing.
• Firms should be flexible in using production
technique that are capital is expensive, the firm
may adopt labor-intensive techniques to save on
production cost.
• Managers and supervisor with excellence people
skills can motivate their workers to excel enjoy
their work and contribute positively to the goals of
the firm.
 BALANCED
SCORECARD- A WAY OF
RECKONING
EFFECTIVENESS

• Shareholders. Aside from

a reasonable rate of return
to their investments in the
firm, owners of the
enterprise are interested in
the continuity, stability, and
growth of the firm.
• Managers. As administrators of
the resources of the firm,
operating officers, managers, and
supervisors may want control in
decision-making, flexibility in
managing risks affecting the
business enterprise and adequate
compensation.
• Workers. Adequate
compensation, good
working environment,
and protection of labor
rights are the main
concern of workers.
• Customers. Aside
from value for money,
customers are
concerned about the
reliability,
consistency, and
quality of goods and
services.
 Government
General Public

Government. Aside from taxes, the government is General public. The general public may be interested in the
interested on how the firm can generate and provide responsibility of the firm to its immediate neighborhood and the
employment to a growing labor force. care for the environment.

  In looking at the firm in each dimension, there is a need to develop
measurements, gather information, and evaluate these indicators with their
corresponding perspective.

• Learning and growth perspective. To achieve the vision of

the firm, how will it sustain the firm's ability to change and
improve? This requires constant training of the workforce and
the inculcation of organizational culture among managers and
employees.
• Business process perspective. This view points to the
internal processes of the company. Identification of business
activities that the company can excel in and can be considered
as best practices that can satisfy shareholders and customers.
Customer perspective. To achieve the company vision,
how should the company appear to its customers? Is there a focus
on the customer in the vision and mission of the firm? Are the customers
satisfied with the products and services produced by the company? Has the
company developed brand loyalty among the customers on the products and
services of the firm?

Financial perspective. To succeed financially, how should the company ani

appear to its shareholders? Timely, accurate, and understandable financial
data is not only crucial to managers in making strategic decisions but also in
assuring the shareholders on the financial health of the company
Thank you