Introduction to

Operations Management
 Operations Management - Meaning

Management
Operations
Process
GRGSMS – Educate to Empower

The term Operations Management refers to the

Direction and Control of the Processes that Transform
inputs into finished goods and services for customers.
One of the four major functions in an organization
A competitive weapon
Applies to all categories of organizations
Is concerned with successful management of People,
Capital, Information and Materials to achieve
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objectives
 Systems View of OPM

External Environment
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Customer or Client Participation

Operations &
Inputs Processes Outputs
Workers
Managers 1 3
Equipment 5 Goods
Facilities Services
Materials 2 4
Services
Land
3
Energy
Information on Performance
 Some Types of Process
A PROCESS is any activity or group of activities that take one or more
inputs, transforms, adds value to them, and provides an output for a
customer
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Business Process Facility

Physical or chemical change of
Factory raw materials into products
Plant & Machinery

Movement of Passengers &

Airline luggage
Aircrafts, Airports

School Education of students Class Rooms

Healing of sick and wounded Operation Theatre, Lab,

Hospital patients MEE, Patient Rooms

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 Characteristics of Mfg. & Service
Operations

Manufacturing Service
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Physical, Durable Product Intangible, Perishable Product

Output can be Inventoried Output can’t be Inventoried
Low Customer Contact High Customer Contact
Long Response Time Short Response Time
R/N/International Markets Local Markets
Large Facilities Small Facilities
Capital Intensive Labour Intensive
Quality easily measured Quality Not Easily Measured
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 Mfg. Vs Service Continuum
High percentage goods Low percentage goods
Low percentage service High percentage service

Services
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Goods

More Like Manufacturing More Like Service

Steel production Home remodeling Restaurant Teaching Family Salon

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 Scope of Operations Management

Operations Management Encompasses:

Forecasting & Inventory Management
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Capacity & Layout planning

SCM
Designing & Managing Processes
Assuring quality
Motivating employees
Deciding where to locate facilities
And more . . .
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 Business Functions Overlap

Operations
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Marketing Finance

Synergies must exist with other functional areas of the

organization
Operations account for 60-80% of the direct expenses
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–a critical determinant of a firms profit.
 Responsibilities of Operations
Management
Planning Organizing
Capacity Arrangement of Depts.
Location Acquisition of P&M
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Product & Services Implementing the Plan

Make or Buy Staffing
Layout Hiring / Layoff
Projects Use of Overtime
Scheduling Directing
Controlling Incentive Plans
Inventory Issue of Work Orders
Quality Job Assignments
Costs
9 Productivity
 Types of Operations

Operations Examples
Goods Producing Farming, mining, construction,
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manufacturing
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts
Communication Newspapers, radio and television
newscasts, telephone, satellites
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 Value Addition- What it Means?
The difference between the cost of inputs
and the value or price of outputs
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Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
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 Historical Evolution of Operations
Management
Industrial Revolution (1770’s)
Scientific Management (1911)
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Mass production
Interchangeable parts
Division of labor
Human Relations Movement (1920-60)
Decision Models (1915, 1960-70’s)
Influence of Japanese Manufacturers

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 Historical Evolution of Operations
Management
JIT
Manufacturing Strategy Paradigm
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Service Quality and Productivity

Business Process Reengineering
Supply Chain Management
Electronic Commerce

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 Business Trends Impacting OPM

Fastest Growing Sector in Developing Countries

25% in 1951 to 45% in 2002 to 55% in 2011
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More than 80% of the Jobs in Business are in Service

Govt.; Wholesale & Retail; Utilities
Productivity Improvement
Basic Measure of Performance of Economy, Inds., Processes
P=Value of Output Produced/Value of Input Resources Used
Labour P = No. of Pieces Produced / Employee Hours
Multi Factor Productivity =
(Qty*Std.Cost) / (Labour C+ Material C+ Overhead Cost)

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 Business Trends Impacting OPM, Contd…

Globalisation
Drivers
Improved Transportation & Communication
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technologies
Relaxation of Regulation on Financial Institutions
Increased Demand for Imported S & G
Low Quota Restriction & other Trade Barriers
Comparative cost advantages
Drawbacks
Disclosure of Proprietary Technology
Political Risks – Nationalization in Extreme Case
Employee Skill Up gradation time
Customer Response Time may be longer when a firm’s
operations are scattered
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Cross-Functional Connections may not be Effective
 Business Trends Impacting OPM, Contd…

Changing Paradigm of Competition

Quality
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Time
Technological Change-IT,AI, Internet, EDI
Environmental, Ethical and Work-Force Diversity Issues
Solve Social Problems
Respond to a Broader Constituency than Shareholders
Serve a Range of Human Values that go beyond
Economic Values
OPM Issues : Unsafe Workplace; Discrimination; Toxic
16 Wastes; Poverty; Air Quality; Global Warming.
 OPM Across Organization

Cross Functional Coordination

M-Demand O-HR, Capital
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M-New Prod./ Markets O-Facility Locations and Relocations

M/S-Delivery Promises O-Current Capabilities

M-Demand Forecasts O-Capacity Planning
F-Cost Indicators O-Labour Costs, New Technology
Impact, Quality Improvements
HR-Hiring, Training O-Provides Inputs to HR
Engg.-New Product
O-Provides Capability Inputs to Engg.
Design – Trade-offs to
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Match OP Capabilities
 Achieving Cross-Functional
Coordination
Evolve a Unified Strategy
Redesign Organization Structure and
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Hierarchy
Encourage CFC Through Reward System
Set up Task Forces and Committees
Share Information through MIS & IT
Joint Cafeteria, Exercise Rooms, Training,
Social Events

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 Operations Strategy – The Linkages

OS is the Means by which firms develop competitive capabilities

Market Analysis Socioeconomic &
Segmentation Business
Environment
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Needs Assessment

Corporate Strategy
Missions  Goals  Distinctive Competencies

Future Directions Competitive Priorities Capabilities

Operations Mktg. Current
Global Strategy  Cost Quality Fin. Needed
New Products/Ser  Time  Flexibility Others Plans

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Functional Area Strategies
 Finance  Marketing  Operations  HR
 Operations Strategy
Operations Strategy can help implement Corporate Strategy
Competitive Advantage can be gained through Competitive
capabilities.
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Competitive Competitive
Capabilities Priorities
COST Low-Cost Operations
High-performance Design
QUALITY
Consistent Quality
Fast Delivery Time
TIME On-time Delivery
Development Speed
Customization
FLEXIBILITY
Volume Flexibility
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Question Time