DFUB 8102: Production and Operations

Management

Introduction to
Operations Management
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 Introduction to Operations Management (OM)
What do you understand by production?
•Refers to the process of creating a product by combining
the factors of production.
•Production - Land, labor and capital.
•Operations are activities with one/more subtasks.
•Usually operations create a products that satisfy
customers needs and wants.
 Input/output model
• Operations Management should be studied under
the input – output model of the organization.
 Description of OM
OM described by a shift in the service and
manufacturing sectors of the economy.
As service sector became more prominent, the change
from ‘production 'to ‘operations’ indicating the
broadening of the field to service industry.
The importance of OM lies in examining the
processes by which goods and service are created and
to use the available knowledge and techniques to
resolve problems.
 Historical Development of OM
Operations management (OM) has evolved
significantly over time, reflecting changes in
technology, society, and business practices. An
overview of OM historical development can be
explained below.
1. Pre-Industrial Revolution (Before 18th Century)
Craft Production: Goods were produced by skilled
craftsmen using simple tools. Production was labor-
intensive and customized.
Guilds: Craftsmen organized into guilds that
regulated quality, training, and prices.
 Historical Development of OM …..
o 2. Industrial Revolution (Late 18th - Early 19th
Century)
o Mechanization: The introduction of machinery
transformed production. Factories emerged, leading to
mass production.
o Division of Labor: Workers specialized in specific
tasks, increasing efficiency. Notable figures like Adam
Smith discussed productivity in "The Wealth of
Nations" (1776)
 Historical Development of OM …...
3. Scientific Management (Early 20th Century)
Frederick Taylor: Introduced principles of scientific
management, emphasizing efficiency and time studies.
His book "The Principles of Scientific Management"
(1911) laid the groundwork for modern OM.
Henry Ford: Pioneered the assembly line, further
enhancing mass production techniques.
 Historical Development of OM ……….
• 4. Human Relations Movement (1930s)
Focus shifted from purely mechanical efficiency to
understanding worker motivation and behavior. The
Hawthorne Studies highlighted the impact of social
factors on productivity..
 5. Post-War Developments (1945-1960s)
Operations Research: Emerged during World
War II, utilizing mathematical models to solve
complex operational problems.
Quality Control: Figures like W. Edwards Deming
and Joseph Juran emphasized the importance of
quality management, leading to Total Quality
Management (TQM) principles

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 6. Globalization and Technology (1970s-
1980s)
Just-In-Time (JIT): Developed by Toyota, JIT
aimed to reduce inventory costs and improve
efficiency.
Computerization: The rise of computers
transformed data processing and decision-
making in operations.

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 7. Modern Era (1990s-Present)
Lean Manufacturing: Focuses on minimizing
waste while maximizing productivity. It builds on
JIT principles.
Agile Operations: Emphasizes flexibility and
responsiveness to market changes.
Sustainability and Ethical Practices: Increasing
focus on environmentally and socially responsible
operations.

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 Digital Transformation: Adoption of advanced
technologies like AI and big data analytics to
enhance decision-making and operational
efficiency

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 Operations Management in Services
 Operations Management
Management of the conversion process which
transforms inputs such as raw material and labor
into outputs in the form of finished goods and
services.

Inputs Outputs
(customers Transformation Process (goods
and/or (components) and
materials) services)
 Why Operations Management?
 OM is one of three major functions
(marketing, finance, and operations) of any
organization).
 We want (and need) to know how goods and
services are produced.
 We want to understand what operations
managers do.
 OM is such a costly part of an organization.
 What are the Critical Decisions in OM
Design of goods and services
Managing quality
Process and capacity design
Location strategy
Layout strategy
Human resources and job design
Supply chain management
Inventory management
…………………………………….
 Critical Decisions in OM!
 Intermediate and short - term scheduling
 Are we better off keeping people on the payroll
during slowdowns?
 Can we go for the overtime, outsource, layoff
strategy (benefit - cost results).
 Which jobs do we perform next?
 Maintenance
 Who is responsible for the maintenance?
 When do we do maintenance?
 Benefit - cost of breakdown against preventive
 Safety at workplace, …………...
 Traditional vs Modern View of OM
Under the traditional view: OM is viewed
as a standalone function in the organization
OM is frequently seen as a distinct
functional area alongside other key areas
such as finance and marketing.
In this context, the role of the operations
management function is limited to simply
producing goods and services.
 Traditional vs Modern View of OM
Examples: for manufacturing firms, the
operations area would be dealing with the
production and assembly tasks that takes place
on the factory-floor.
At school context, what happens in classroom.
In the hospital, be what happens in surgical
theatres, ……..
At the harbor, be handling of containers, …….
 Modern view of OM
Ensures a high level of inter-functional interactions.
When viewed from this wider perspective, it is evident
that operations are not confined to a specific area.
For example, operations management in a hospital
would involve determining size of the facility,
deciding types and quantities of equipment to acquire,
arranging these facilities for the hospital to run
efficiently
 Relevance to manufacturing and
service undertakings
Manufacturing - tangible output;
Service - intangible in nature, thus controlling
of the two is difficult.
 Distinctive areas:-
Customers contact
Finished goods inventory
Measuring performance
Quality management
 Planning horizon
Long range planning - used to guide the medium range
plans which afterwards guide the short range plans.
Long range: strategic issues such as capacity decisions,
facility location/expansion, purchase of capital
equipment, > 1 year.
Medium range: minor changes in capacity such as
changes in employment levels, 3 - 18 months.
Short range plans: most comprehensive and deals with
end items and quantities made on daily basis or hourly
basis, upto 3 months.
 Operational level of OM
OM’s function focuses on adding value through the
transformation process of converting inputs into
outputs.
Physical: manufacturing
Locational: transportation
Exchange: retailing
Storage: warehousing
Physiological: health care
Informational: telecommunications