OPM Lecture 1

Using Operations
to Create Value
Module 1
Managing Operations
Lecture 1
Lecture Objectives
• By the end of this lesson you will be able to:
• Describe what operations management is
• Understand the process view of operations
management
• Illustrate operations management based
successes in different types of businesses
• Connect operations management to business
performance
RECOGNIZING OPERATIONS MANAGEMENT
• Take the example of a smart phone, laptop or

tablet that you usually use
• Think of the different stages that this product,

this device, had to go through before it got to
you.
• Operations management impacted:
• Product design
• Assembly Supplier selection
• Employee training
• Sales outlet
• Troubleshooting support
• Safe disposal
OPERATIONS MANAGEMENT IN EVERYDAY
PRODUCTS
• Furniture that you are sitting on or the
furniture at your home
PRODUCTS
• Restaurant you eat at
PRODUCTS
• Transportations: car, truck, airplane, Ship etc.
PRODUCTS
• Recyclable waste you dispose
PRODUCTS
• News that you listen to or read
PRODUCTS
• So what you're seeing over here is that
operations management is involved, not just
in physical goods like furniture, also in services
like restaurants, but it's also involved in
information exchange like the news that you
listen to or read.
DEFINING OPERATIONS MANAGEMENT
• Operations Management is about organizations effectively
and efficiently using their resources and activities to
transform materials and information into goods and
services for customers.
• Effectively means that it should be using it for the purpose
of what you are giving to the customer, and efficiently
means it should be using it from a cost-benefit perspective
in the right way. So effectively means that the consumer
gets what they're expecting, and efficiently means that the
company is able to make a profit out of it, is able to deliver
things to customers while making a decent profit.
What is Operations Management?
Operations
Management
The systematic design,
direction, and control of
processes that
transform inputs into
services and products
for internal, as well as
external, customers
Operations Management
• Process
– Any activity or group of activities that takes one or
more inputs, transforms them, and provides one
or more outputs for its customers
• Operation
– A group of resources performing all or part of one
or more processes
What is Supply Chain Management?
Supply Chain
Management
The synchronization of
a firm’s processes with
those of its suppliers
and customers to
match the flow of
materials, services, and
information with
customer demand
Supply Chain Management
• Supply Chain
– An interrelated series of processes within and
across firms the produces a service or product to
the satisfaction of customers
Role of Operations in an Organization
Integration
between
Different
Functional
Areas of a
Business
Figure 1.1
How Processes Work
Figure 1.2
How Processes Work
• Every process and every person in the
organization has customers
– External customers
– Internal customers
• Every process and every person in the

organization relies on suppliers
– External suppliers
– Internal suppliers
Nested Processes
• Nested Process
– The concept of a process within a process
PROCESS VIEW OF OPERATIONS
MANAGEMENT
MANAGEMENT
MANAGEMENT
MANAGEMENT
• There are going to be many sub processes with the
large process for any product/service
MANAGEMENT
• Therefore the level of granularity at which you want to study these
processes is going to be determined by whoever is analyzing the process,
and that's going to impact how closely you study each sub process.
• The second thing is that every process is not going to be dealing with
external customers. You're going to have support processes that relate to
the things that you need to do as a business. A car manufacturing
company is going to need processes for hiring people, for employing
people. The car manufacturing company is going to need to maintain its
facilities, and that's where it's going to need these support processes.
• In summary, there's going to be this core process, and there are going to
be some support processes that need to be there along with it. Also,
there's going to be a large process, and there are going to be sub
processes in order to see how the process is working out.
PROCESS VIEW REFLECTION
• Consider any organization –a company, business, or a
non-profit entity. Apply the Process View of
Operations to think of the main inputs, processes, and
outputs.
• Reflect on the sub-processes related to the main

products – goods and services – of the business and
the support processes that support the existence of
the business.
FEATURES OF OPERATIONS MANAGEMENT
• All goods, services, and information exchanges

involve operations.
• We assess operations in relation to expectations.
• Many areas of an organization and many
organizations are involved.(Product design,
Assembly Supplier selection, Employee training,
Sales outlet)
• Processes range from long-term strategic to day-to-
day operational, and can be completely internal.
A Supply Chain View
Each activity in a process should add value to the
preceding activities; waste and unnecessary cost
should be eliminated.
Figure 1.4
The Supply Chain View
Supplier relationship process – A process that selects the
suppliers of services, materials, and information and facilitates
the timely and efficient flow of these items into the firm
Figure 1.4
New service/product development – A process that designs and
develops new services or products from inputs from external
customer specifications or from the market
Figure 1.4
Order fulfillment process – A process that includes the
activities required to produce and deliver the service or
product to the external customer
Figure 1.4
Customer relationship process – A process that identifies, attracts
and builds relationships with external customers and facilitates
the placement of orders by customers
(customer relationship management)
Figure 1.4
Support Processes - Processes like Accounting, Finance, Human
Resources, Management Information Systems and Marketing
that provide vital resources and inputs to the core processes
Figure 1.4
Supply Chain Process
• Supply Chain Processes
– Business processes that have external customers
or suppliers
– Examples
• Outsourcing
• Warehousing
• Sourcing
• Customer Service
• Logistics
• Crossdocking
STUDYING OPERATIONS MANAGEMENT
1)Operations strategy
• In operations strategy, what you look at is the
overall outlook for the organization. What
should be their operations management
goals? What should be the competencies that
they should be going for?
2) Process analysis
• look at the input process, output view
and analyzing the operations of a company
based on some models in order to analyze them
and see how effective and efficient they are.
• This can be done at a strategic level, but process
analysis can also be done at the frontline level.
For example: How many cashiers are needed
for a particular retail store.
3. Supply Chain Management
Operations management decisions are about
deciding whether we should make something or
buy something, whether we should outsource or
vertically integrate.
Supply chain Management describes the
coordination of or the decision making related to
all supply chain activities, starting with raw
material and ending with satisfied customers.
4)Quality Management
Organizations have to think about whether
they’re going to be proactive in trying to reduce
the number of defects that customers get, or
whether they're going to be simply going off
their production numbers, and say that we're
going to have inspection at the end and look at
quality that way.
The historical development of operations
management
• Operations in some form has been

around as long as human endeavor itself
but, in manufacturing at least, it has
changed dramatically over time
Three Major Phases
Craft manufacturing
• Craft manufacturing describes the process by
which skilled craftspeople produce goods in
low volume, with a high degree of variety, to
meet the requirements of their individual
customers.
Mass production
• In many industries, craft manufacturing began

to be replaced by mass production in the 19th
century. Mass production involves producing
goods in high volume with low variety – the
opposite of craft manufacturing.
Mass Production(Innovations 1)
• Standardization:
• An important innovation in operations that
made mass production possible was the
system of standardised and interchangeable
parts known as the ‘American system of
manufacture’, which developed in the United
States and spread to the United Kingdom and
other countries.
Mass production(Innovations 2)
Scientific Management:
• A second innovation was the development by
Frederick Taylor (1911) of the system of
'scientific management’, which sought to
redesign jobs using similar principles to those
used in designing machines.
Mass Production(Innovations 3)
Moving Assembly Line:
• A third innovation was the development of the
moving assembly line by Henry Ford. Instead
of workers bringing all the parts and tools to a
fixed location where one car was put together
at a time, the assembly line brought the cars
to the workers.
Mass Production (in nut shell)
• A system through which large
volumes of standardized products
could be assembled by unskilled
workers at constantly decreasing
costs .
Modern Period
• During the 1970s, markets became highly
fragmented, product life cycles reduced dramatically
and consumers had far greater choice than ever
before.
• TQM
• JIT
• SCM
Modern Period(Different Approaches)
• Flexible specialization
• Lean production
• Mass customization
• Agile manufacturing
Flexible specialization
• Flexible specialization is
a form of industrial organization in which firms
specialize in certain products but are able to
change at short notice to producing different one
s. A notable feature is that such flexibility can
make it viable to produce small batches of each
product. A prerequisite is the use of advanced
flexible technology operated by employees with a
broad range of skills who are able to surmount tr
aditional job boundaries.
Lean production
• Lean production is an approach to
management that focuses on cutting out
waste, whilst ensuring quality. This approach
can be applied to all aspects of a business –
from design, through production to
distribution. Lean production aims to cut costs
by making the business more efficient and
responsive to market needs.
Mass customization
• Mass customization is a business strategy that
focuses on customers. By better
understanding the different types of
customers, businesses can be better equipped
to develop and recognizes the need to provide
outstanding products while using new
programs and procedures.
Agile manufacturing
• While lean manufacturing focuses on
removing waste and 'dropping weight', agile is
more focused at using the current resources
intelligently and that the organization has the
right data to implement changes
in manufacturing.
Modern Period(in a nutshell)
• These approaches all seek to
combine the high volume and
low cost associated with mass
production with the craft
production.
Porter’s Value Chain Model

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Using Operations

• Take the example of a smart phone, laptop or

• Think of the different stages that this product,

• Every process and every person in the

• Reflect on the sub-processes related to the main

• All goods, services, and information exchanges

• Operations in some form has been

• In many industries, craft manufacturing began

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