Introduction to Operations

Management

GP40 – Operations Management

Toufik BOUDOUH

Lecture Outline

• What is Operations Management?

• Operations Function

• Historical Events in Operations Management

• Operations Performance Objectives

• Strategy and Operations

• Processes and technology

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What is operations management?

• Operations management is the activity of managing

the resources which produce and deliver products

and services

– Design, operation, and improvement of productive

systems

• The operations function is the part of the

organization that is responsible for this activity

• Operations managers are the people who have

particular responsibility for managing some, or all, of

the resources which compose the operations

function

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Operations in the organization

• Three core functions:

– the marketing (including sales) function – which is

responsible for communicating the organization’s products

and services to its markets in order to generate customer

requests for service

– the product/service development function – which is

responsible for creating new and modified products and

services in order to generate future customer requests for

service

– the operations function – which is responsible for fulfilling

customer requests for service through the production and

delivery of products and services

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Operations in the organization

• The support functions:

– the accounting and finance function – which provides the

information to help economic decision-making and

manages the financial resources of the organization

– the human resources function – which recruits and

develops the organization’s staff as well as looking after

their welfare

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Activities of core functions

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relationship between the

operations function and other

core and support functions

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Operations management is important in all types of

organization

What is operations?

• Operations is often defined as a transformation

process

• All operations produce products and services by

changing inputs into outputs using an ‘input-

transformation-output’ process

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Operations as a Transformation

Process

INPUT •Material•Machines•Labor•Management•Capital

TRANSFORMATIONPROCESS

OUTPUT •Goods•Services

Feedback & Requirements

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Operations as a Transformation

Process

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Transformation Process

• Physical: as in manufacturing operations

• Locational: as in transportation or warehouse

operations

• Exchange: as in retail operations

• Physiological: as in health care

• Psychological: as in entertainment

• Informational: as in communication

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Inputs to the process

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Outputs from the process

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Examples of operations and processes

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Operations: Function or Activity?

• we must distinguish between two meanings of

‘operations’

– ‘Operations’ as a function: the part of the organization

which produces the products and services for the

organization’s external customers

– ‘Operations’ as an activity: the management of the

processes within any of the organization’s functions

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Processes in non-operations functions

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Evolution of Operations and Supply

Chain Management

• Craft production– process of handcrafting products or services for individual

customers

• Division of labor– dividing a job into a series of small tasks each performed

by a different worker

• Interchangeable parts– standardization of parts initially as replacement parts;

enabled mass production

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Evolution of Operations and Supply

Chain Management

• Scientific management

– systematic analysis of work methods

• Mass production

– high-volume production of a standardized product for a

mass market

• Lean production

– adaptation of mass production that prizes quality and

flexibility

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Historical Events in Operations

Management

Era Events/Concepts Dates Originator

IndustrialRevolution

Steam engine 1769 James Watt

Division of labor 1776 Adam Smith

Interchangeable parts 1790 Eli Whitney

Scientific Management

Principles of scientificmanagement

1911 Frederick W. Taylor

Time and motion studies 1911 Frank and Lillian Gilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford

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Historical Events in Operations

Management

Era Events/Concepts Dates Originator

Human Relations

Hawthorne studies 1930 Elton Mayo

Motivation theories1940s Abraham Maslow1950s Frederick Herzberg1960s Douglas McGregor

Operations Research

Linear programming 1947 George DantzigDigital computer 1951 Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM

1950sOperations research groups

MRP, EDI, EFT, CIM1960s, 1970s

Joseph Orlicky, IBMand others

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Historical Events in Operations

Management

Era Events/Concepts Dates Originator

QualityRevolution

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)TQM (total qualitymanagement)

1980sW. Edwards Deming, Joseph Juran

Strategy andoperations

1980sWickham Skinner, Robert Hayes

Business process reengineering

1990sMichael Hammer,James Champy

Six Sigma 1990s GE, Motorola

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Historical Events in Operations

Management

Era Events/Concepts Dates OriginatorInternet Revolution

Internet, WWW, ERP, supply chain management

1990s ARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE

E-commerce 2000s Amazon, Yahoo, eBay, Google, and others

Globalization WTO, European Union, and other trade agreements, global supply chains, outsourcing, BPO, Services Science

1990s2000s

Numerous countriesand companies

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Operations performance objectives

• Quality

• Speed

• Dependability

• Flexibility

• Cost

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The quality objective• Quality reduces costs

• Quality increases dependability

• Quality means different things in different

operations

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The quality objective• Quality reduces costs

• Quality increases dependability

• Quality means different things in different

operations

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The quality objective• Quality reduces costs

• Quality increases dependability

• Quality means different things in different

operations

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The speed objective• Speed reduces inventories

• Speed reduces risks

• Speed means different things in different

operations

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The speed objective• Speed reduces inventories

• Speed reduces risks

• Speed means different things in different

operations

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The speed objective• Speed reduces inventories

• Speed reduces risks

• Speed means different things in different

operations

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The dependability objective• Dependability saves time and money

• Dependability means different things in

different operations

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The dependability objective• Dependability saves time and money

• Dependability means different things in

different operations

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The dependability objective• Dependability saves time and money

• Dependability means different things in

different operations

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The flexibility objective

• Product/service flexibility – the operation’s ability to introduce new or modified products and services

• Mix flexibility – the operation’s ability to produce a wide range or mix of products and services

• Volume flexibility – the operation’s ability to change its level of output or activity to produce different quantities or volumes of products and services over time

• Delivery flexibility – the operation’s ability to change the timing of the delivery of its services or products

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The flexibility objective

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• Flexibility means different things in different

operations

The flexibility objective

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• Flexibility means different things in different

operations

The flexibility objective

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• Flexibility means different things in different

operations

The cost objective

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• Low cost is a universally attractive objective

• Cost means different things in different

operations

The cost objective

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• Low cost is a universally attractive objective

• Cost means different things in different

operations

The cost objective

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• Low cost is a universally attractive objective

• Cost means different things in different

operations

Productivity and Competitiveness

• Competitiveness– degree to which a nation can produce goods and services

that meet the test of international markets

• Productivity– ratio of output to input

• Output– sales made, products produced, customers served, meals

delivered, or calls answered

• Input– labor hours, investment in equipment, material usage, or

square footage

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Productivity and Competitiveness

Measures of Productivity

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Strategy and Operations• Strategy

– Provides direction for achieving a mission

• Five Steps for Strategy Formulation– Defining a primary task

• What is the firm in the business of doing?

– Assessing core competencies• What does the firm do better than anyone else?

– Determining order winners and order qualifiers• What qualifies an item to be considered for purchase?

• What wins the order?

– Positioning the firm• How will the firm compete?

– Deploying the strategy

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Policy Deployment

• Policy deployment

– translates corporate strategy into measurable

objectives

• Hoshins

– action plans generated from the policy

deployment process

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Policy Deployment

Derivation of an Action Plan Using Policy Deployment

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Processes and Technology

• Process Planning (selection)

• Process Analysis

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Process Planning

• Process

– a group of related tasks with specific inputs and outputs

• Process design

– what tasks need to be done and how they are coordinated among functions, people, and organizations

• Process strategy

– an organization’s overall approach for physically producing goods and services

• Process planning

– converts designs into workable instructions for manufacture or delivery

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Process Selection

• Projects

– one-of-a-kind production of a product to customer order

• Batch production

– processes many different jobs at the same time in groups or batches

• Mass production

– produces large volumes of a standard product for a mass market

• Continuous production

– used for very-high volume commodity products

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Product-Process Matrix

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Process Plans

• Set of documents that detail manufacturing and

service delivery specifications

– assembly charts

– operations sheets

– quality-control check-sheets

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Operations sheet

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Process Analysis

• Building a flowchart

– Determine objectives

– Define process boundaries

– Define units of flow

– Choose type of chart

– Observe process and collect data

– Map out process

– Validate chart

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Process Flowcharts

• Look at manufacture of product or delivery of

service from broad perspective

• Incorporate

– nonproductive activities (inspection,

transportation, delay, storage)

– productive activities (operations)

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Process Flowchart Symbols

Operations

Inspection

Transportation

Delay

Storage

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Process Flowchart: Example

Process

Flowchart

of Apple

Processing

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