OPERATION MANAGEMENT

1. 1
Introduction to Production
&
Operations Management

2. 2
Introduction
 Operations management is the management of an
organization’s productive resources or its production
system.
 A production system takes inputs and converts them
into outputs.
 The conversion process is the predominant activity of
a production system.
 The primary concern of an operations manager is the
activities of the conversion process.

3. 3
Organizational Model
Marketing
MIS
Engineering
HRM
QA
Accounting
Sales
Finance
OM

4. 4
Entry-Level Jobs in OM
 Purchasing planner/buyer
 Production (or operations) supervisor
 Production (or operations) scheduler/controller
 Production (or operations) analyst
 Inventory analyst
 Quality specialist

5. 5
Manufacturing
Industry: Job
Title
Job Description/Duties Service
Industry: Job
Titles
Production
Supervisor
Supervises employees as products or services are
produced. Responsible for cost, quality, and
schedule performance
Department
Supervisor
Purchasing
planner/buyer
Buys products or services to support operations.
Responsible for supplier performance
Purchasing
Agent
Inventory
analyst
Oversees all aspects of inventories. Responsible
for inventory levels, audits, record accuracy,
authorizing orders and expediting
Inventory
analyst
Production
controller
Authorizes production of orders, develops
production schedule and plans. Responsible for
meeting customer due dates and efficient shop
loading
Staff scheduler
or shipping
scheduler
Production
analyst
Analyse production problems, develops forecasts,
plan for new products, and carries out other
special projects.
Operations
Analyst
Quality
Specialist
Oversees acceptance sampling, process control,
and quality management. Responsible for product
quality from suppliers and from production
Quality analyst

6. 6
Historical Milestones in OM
 The Industrial Revolution
 Post-Civil War Period
 Scientific Management
 Human Relations and Behaviorism
 Operations Research
 The Service Revolution

7. 7
The Industrial Revolution
 The industrial revolution developed in England in the
1700s.
 The steam engine, invented by James Watt in 1764,
largely replaced human and water power for factories.
 Adam Smith’s The Wealth of Nations in 1776 touted the
economic benefits of the specialization of labor.
 Thus the late-1700s factories had not only machine power
but also ways of planning and controlling the tasks of
workers.

8. 8
The Industrial Revolution
 The industrial revolution spread from England to other
European countries and to the United Sates.
 In 1790 an American, Eli Whitney, developed the concept
of interchangeable parts.
 The first great industry in the US was the textile industry.
 In the 1800s the development of the gasoline engine and
electricity further advanced the revolution.
 By the mid-1800s, the old cottage system of production
had been replaced by the factory system.

9. 9
Post-Civil War Period
 During the post-Civil War period great expansion of
production capacity occurred.
 By post-Civil War the following developments set the
stage for the great production explosion of the 20th
century:
 increased capital and production capacity
 the expanded urban workforce
 new Western US markets
 an effective national transportation system

10. 10
Scientific Management
 Frederick Taylor is known as the father of scientific
management. His shop system employed these steps:
 Each worker’s skill, strength, and learning ability were
determined.
 Stopwatch studies were conducted to precisely set
standard output per worker on each task.
 Material specifications, work methods, and routing
sequences were used to organize the shop.
 Supervisors were carefully selected and trained.
 Incentive pay systems were initiated.

11. 11
Scientific Management
 In the 1920s, Ford Motor Company’s operation
embodied the key elements of scientific management:
 standardized product designs
 mass production
 low manufacturing costs
 mechanized assembly lines
 specialization of labor
 interchangeable parts

12. 12
Human Relations and Behavioralism
 In the 1927-1932 period, researchers in the
Hawthorne Studies realized that human factors were
affecting production.
 Researchers and managers alike were recognizing
that psychological and sociological factors affected
production.
 From the work of behavioralists came a gradual
change in the way managers thought about and
treated workers.

13. 13
Operations Research
 During World War II, enormous quantities of resources
(personnel, supplies, equipment, …) had to be deployed.
 Military operations research (OR) teams were formed to
deal with the complexity of the deployment.
 After the war, operations researchers found their way
back to universities, industry, government, and consulting
firms.
 OR helps operations managers make decisions when
problems are complex and wrong decisions are costly.

14. 14
The Service Revolution
 The creation of services organizations accelerated sharply
after World War II.
 Today, more than two-thirds of the US workforce is
employed in services.
 About two-thirds of the US GDP is from services.
 There is a huge trade surplus in services.
 Investment per office worker now exceeds the investment
per factory worker.
 Thus there is a growing need for service operations
management.

15. 15
The Computer Revolution
 Explosive growth of computer and communication
technologies
 Easy access to information and the availability of more
information
 Advances in software applications such as Enterprise
Resource Planning (ERP) software
 Widespread use of email
 More and more firms becoming involved in E-Business
using the Internet faster, better decisions over greater
distances

16. 16
Studying Operations Management
 Operations as a System
 Decision Making in OM

17. 17
Operations as a System
Inputs Outputs
Conversion
Subsystem
Production System
Control
Subsystem

18. 18
Inputs of an Operations System
 External
 Legal, Economic, Social, Technological
 Market
 Competition, Customer Desires, Product Info.
 Primary Resources
 Materials, Personnel, Capital, Utilities

19. 19
Conversion Subsystem
 Physical (Manufacturing)
 Locational Services (Transportation)
 Exchange Services (Retailing)
 Storage Services (Warehousing)
 Other Private Services (Insurance)
 Government Services (Federal)

20. 20
Outputs of an Operations System
 Direct
 Products
 Services
 Indirect
 Waste
 Pollution
 Technological Advances

21. 21
Production as an Organization Function
 US companies cannot compete with marketing,
finance, accounting, and engineering alone.
 We focus on OM as we think of global
competitiveness, because that is where the vast
majority of a firm’s workers, capital assets, and
expenses reside.
 To succeed, a firm must have a strong operations
function teaming with the other organization
functions.

22. 22
Decision Making in OM
 Strategic Decisions
 Operating Decisions
 Control Decisions

23. 23
Strategic Decisions
 These decisions are of strategic importance and have
long-term significance for the organization.
 Examples include deciding:
 the design for a new product’s production process
 where to locate a new factory
 whether to launch a new-product development plan

24. 24
Operating Decisions
 These decisions are necessary if the ongoing
production of goods and services is to satisfy market
demands and provide profits.
 Examples include deciding:
 how much finished-goods inventory to carry
 the amount of overtime to use next week
 the details for purchasing raw material next month

25. 25
Control Decisions
 These decisions concern the day-to-day activities of
workers, quality of products and services, production
and overhead costs, and machine maintenance.
 Examples include deciding:
 labor cost standards for a new product
 frequency of preventive maintenance
 new quality control acceptance criteria

26. 26
What Controls the Operations System?
 Information about the outputs, the conversions, and
the inputs is fed back to management.
 This information is matched with management’s
expectations
 When there is a difference, management must take
corrective action to maintain control of the system

27. 27
The Product/Process Continuum
Product
orientation
Process
orientation
Automobile
manufacturers Restaurants Undertakers
Automobile
retailers Banks
Airlines
Consultancies
Photocopier
manufacturers &
service providers
Organizations on a
Product/Process Continuum

28. 28
The Transformation Process
Transformation
Process
Feedback Mechanisms
INPUTS OUTPUTS
Random disturbances
Quality of inputs
monitored
Quality of outputs
monitored

29. 29
The Transformation Process
For a Service Organization (An MBA Institute)
Transformation
Process
Raw minds
(students)
Teachers
Class rooms
Computer lab
Library
Projectors
(OHP, LCD etc)
Administrative
staff
Enlightened students with:
• Good communication skills
• Pleasant personalities
• Leadership qualities
• Good analytical ability
• Team spirit
• Decision making abilities
• Computer skills
Random disturbances
• Strikes of students,
teachers or staff
• Undue interference of
the government in the
working of institutions
Quality of
inputs
monitored
Quality of
outputs
monitored
INPUTS
Feedback Mechanisms
• Success at placement interviews
• Grades obtained in examinations
• Rising career graph of alumni in the industry
• Number of applications for admission
in the institute
• Ratings of surveys
OUTPUTS

30. 30
The Transformation Process For a Hybrid
Service & Manufacturing Organization
(A Restaurant)
Transformation
Process
Building
Vegetables
Furniture
Mutton,
chicken,
pork, etc.
Cooking oil,
Spices, etc.
Waiters
Manager
Customers satisfied with:
• Good preparation of the
food
• Pleasant behavior and
personality of the waiter
• Genuine prices charged
Random disturbances
• High turnover of chefs,
waiters, etc.
• Inflation
• Government’s taxation
policy
Quality of
inputs
monitored
Quality of
outputs
monitored
INPUTS
Feedback Mechanisms
• Rising Revenues
• Repeat Customers
• Appreciation of customers
OUTPUTS
Customers
Chef

31. 31
The Transformation Process For a Purely
Manufacturing Organization (A Refrigerator
Manufacturer)
Transformation
Process
Building
Office
infrastructure
(computers,
furniture, etc.)
Workers
Packaging
material
Capital
Managers
Customers satisfied with:
• Good cooling performance
• Less consumption with
electricity
• Good after-sales service
• New advanced features
Random disturbances
• High turnover of workers
and managers
• Recession
• Government’s taxation
policy
• Strikes instigated by trade
unions
Quality of
inputs
monitored
Quality of
outputs
monitored
INPUTS
Feedback Mechanisms
• Rising sales volume
• Lesser customer complaints
• Positive response of customers in
the feedback forms
• Productivity
OUTPUTS
Machines &
Equipments
Components,
parts, sub-
assemblies, etc.

32. 32
Production & Operations
Management (POM) Defined
Production & Operations Management is defined as
the design, operation, and improvement of the
transformation process, which converts the various
inputs into desired outputs of products and services.

33. 33
Operations
Strategy
Inventory
Management
for
Independent
Demand
Items
Facility
Location
Planning
Facility
Layout
Planning
Project
Management
Total
Productive
Maintenance
(TPM)
Facility
Capacity
Planning
Materials
Requirement
Planning (MRP)/
Just-In-Time (JIT)
System/ Supply
Chain Mgt. (SCM)
New Product
Development
Business Process Outsourcing
and Off-shoring
Steps in the
production/operations
process from the point of
view of an entrepreneur

34. 34
Aggregate Production/
Operations Planning
Work Design Quality
Management
Operations
Scheduling
Service
Operations
Management
Demand
Forecasting
Steps in the production/operations process
from the point of view of an entrepreneur

35. 35
Process Design
Types of Processes
Types of Processes
Continuous
Process
Semi-continuous
(Repetitive/Assembly)
Process
Intermittent
Process
Project
Batch Process Job Shop