OPERATIONS MANAGEMENT

MBA 713

By
Abas Mohammed (PhD)
Assistant Professor of Management studies

E-mail: delterau99@gmail.com
COURSE CONTENTS

Chapter-1: Nature of Operations Management

Chapter-2: Operations Strategy and Competitiveness
Chapter-3: Design of the Operation Systems
Chapter-4: Forecasting
Chapter-5: Operations Planning and Control
Chapter-6: Quality Management
Chapter-7: Supply Chain Management
Chapter-8: Models of Improving Operations
CHAPTER ONE

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CHAPTER OUTLINE
➢Operation management overview
➢Operations Management Objectives
➢Scope of Operations Management
➢Operations Function in Organizations
➢The Strategic Role of Operations
➢Operation decision making
➢Manufacturing Operations Vs Service Operations
➢Productivity and its measurement

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OPERATIONS MANAGEMENT OVERVIEW
 Operations management is important. It is
concerned with creating the services and
products upon which we all depend.
 Operations management is also exciting. It is at
the center of so many of the changes affecting the
business world.
 Operations management is also challenging.
Promoting the creativity which will allow
organizations to respond to so many changes is
becoming the prime task of operations managers.

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CONT’D…
Operations management is the activity of managing
the resources that create and deliver services and/or
goods. The operations function is the part of the
organization that is responsible for this activity.
Operations management is about how organizations
create and deliver services and goods. Hence, it is
responsible for supplying the goods and/or service of
an organization.
OM defined as the design, operation and
improvement of the systems that create and deliver
the firm’s primary products and services.
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CONT’D…

OM Is concerned with the management of entire

system (from input to output) that produces goods or
deliver products.

Operations managers make decisions regarding

the operations function and its connection
with other functions.

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KEY POINTS IN OM DEFINITION
 Operation Management is the field of study that tries
to understand, explain, predict and change
organizational and strategic effects of the
transformation process. Hence, OM deals with the
effective and efficient management of the
transformation process.
 Decisions : the operations manager must make
Decisions (process, quality, capacity, and inventory)
 Functions : Operation is the main Functions in the
organization. (manufacturing, Production dept)
 Process: Plan and control Process for producing
goods and services
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Operations Management Objectives
 Quality: goods and services that are reliable
and perform correctly.
➢ Quality allows customers to receive the performance that
they expect.
 Efficiency: the amount of input to produce a
given output.
➢ Less input required lowers cost and waste.
 Responsiveness to customers: actions taken to
respond to customer needs.
➢ Firm can react quickly and correctly to customer needs as
they arise.
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Scope of Operations Management
 Operations management concern with the conversion of
inputs into outputs, using physical resources, so as to
provide the desired utilities to the customer while meeting
the other organizational objectives of effectiveness,
efficiency and adoptability. Following are the activities
which are listed under production and operations
management functions:
 Product selection and design
 Process selection and planning
 Facilities (plant) location, Facilities layout and material
handling

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CONT’D…
 Capacity planning
 Production planning and control (PPC)

 Inventory control

 Quality assurance and control

 Work study and job design

 Cost reduction and cost control

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OPERATIONS IN THE ORGANIZATION
The operations function is one of the three core functions of
any organization. These are:
 The marketing (including sales) function– which is
responsible for communicating the organization’s services
and products to its markets in order to generate customer
requests
 The product/service development function – which is
responsible for coming up with new and modified
services and products in order to generate future
customer requests;
 The operations function
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CROSS-FUNCTIONAL DECISION MAKING
 Operations as the primary function: is a
functional field of business with clear line
management responsibilities
 Uses decision making tools
 Considers facility automation

 Other functions:
 Finance

 Marketing

 Human resource
 Other supporting functions may exist
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OPERATIONS AS A SYSTEM (PROCESS)

Input Transformation Output

(Conversion)
Process

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 CONT’D…

Input Transformation Transformation Output

Fabrication Assembly

Fabrication: making the parts

Assembly: putting the parts together

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CONT’D…

Energy
Materials
Labor Transformation
Goods and/or
(Conversion)
Capital Services
Process
Information

Feedback information for

control of process inputs
and process technology

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 RELATION OF OPERATIONS TO ITS ENVIRONMENT

SOCIETY
External
Human Environment
Engineering Marketing
Resources

Suppliers Operations transformation system CUSTOMERS

Accounting Finance IS

COMPETITORS
GOVERNMENT

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 The Strategic Role of Operations
 The operations process is at the center of any firm.
Effective operations processes increase quality, meet
customer demands, provide new products, and lower the
cost of production.
• Is a vital function necessary for generating money to pay
employees, lenders, and stockholders.
• Effective production and operations management can:
– lower a firm’s costs of production.
– boost the quality of its goods and services.
– enable it to renew itself by providing new products.
– allow it to respond dependably to customer demands.
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OPERATIONS DECISIONS
 Process
 How to produce & deliver
 Capacity
 Physical facilities & labor
 Quality
 Criteria, measurement & process for achieving
 Inventory
 What, when & how much?

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CONT’D…

 Within the operations function, management

decisions can be divided into three broad
areas:
➢ Strategic (long-term) decisions
➢ Tactical (intermediate-term) decision

➢ Operational planning and control(short-term)

decision

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DISTINGUISHING BETWEEN MANUFACTURING
AND SERVICE OPERATION
➢ Tangible/intangible nature of output
➢Can be inventoried/ can not be inventoried
➢ Consumption of outputs (consume over time,
consumes immediately Simultaneous consumption and production)
➢Nature of the work (less labor and more equipment,
high labor and less equipment)
➢Degree of customer contact
✓little consumer contact, Extensive consumer contact
➢Customer participation in conversion
✓distinguish between output (generated service,
medical service) and throughput(going through the
processes )
➢Measurement of performance/quality easy to assess/ difficulty to assess
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 CONTEMPORARY AND CORE ISSUES
OPERATIONS THEMES

 Service and Manufacturing (differences and

implications)
 Customer-Directed Operations
 Time Reduction (Lean Operations)
 Integration of Operations and Other Functions
 Environmental Concerns
 Supply Chain Management
 Globalization of Operations

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MEASURING PRODUCTIVITY
 Productivity is a measure of how efficiently inputs are
converted to outputs
Productivity = output/input

 Total Productivity Measure

Total Productivity = $sales/inputs $

 Partial Productivity Measure

Partial Productivity = cars/employee

 Multifactor Productivity Measure

Multi-factor Productivity = sales/total $costs
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 productivity example - an automobile manufacturer has presented the
following data for the past three years in its annual report. as a potential
investor, you are interested in calculating yearly productivity and year to
year productivity gains as one of several factors in your investment
analysis.
2023 2022 2021
2023 2022 2021
Unit car 2,700,000 2,400,000 2,100,000 Partial Prod. Measure
sales
Unit Car Sales/Employee 24.1 21.2 18.3
Employees 112,000 113,000 115,000
Year-to-year Improvement 13.7% 15.8%

$ Sales $49,000 $41,000 $38,000 Multifactor Prod. Measures

(billions$)
Total Cost Productivity 1.26 1.24 1.19
Cost of $39,000 $33,000 $32,000
Sales
Year-to-year Improvement 1.6% 4.2%
(billions)
Which is the best measurement?
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INTERPRETING PRODUCTIVITY MEASURES
 Productivity measures must be compared to
something, i.e. another year, a different company
 Raw productivity calculations do not tell the
complete story unless there are no major structure
differences.
 In the prior automobile business example, it is
obvious that some major changes were taking place
to yield 15.8% and 13.7% year-to-year
cars/employee productivity improvements. What
changes could improve car sales per employee?
Automation? Outsourcing? Major re-design?
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INTERPRETING PRODUCTIVITY MEASURES
 Other productivity measure questions:
 Is this partial productivity measurement enough to
make an investment decision?
 Is the Total Cost Productivity measure a better
reflection of year to year productivity at 4.2% and
1.6%. Why?
 Should you also look at productivity measures for
the two major competitors for comparison?
 Productivity measure provides information on how
the firm is doing relative to what is critical to the
firm.

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CONT’D…

 Measuring service sector productivity is a unique

challenge
 Traditional measures focus on tangible outcomes

 Service industries primarily produce intangible

outcomes
 Measuring intangibles is challenging

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END OF CHAPTER

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