Chapter 1 Operations Madnagement

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

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OPERATIONS MANAGEMENT

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Operations Management is The business function responsible for

planning, coordinating, and controlling the resources needed to produce products and services for a company.

A management function An organization’s core function In every organization whether Service or

Manufacturing, profit or Not for profit


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Typical Organization Chart


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Business/Functional Strategy


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Importance of Operations Strategy

Companies often do not understand the differences between operational efficiency and strategy

Operational efficiency is performing tasks well, even better than competitors

Strategy is a plan for competing in the marketplace

Operations strategy is to ensure all tasks performed are the right tasks


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Developing a Business Strategy

A business strategy is developed after taking into many factors and following some strategic decisions such as;

What business is the company in (mission)

Analyzing and understanding the market (environmental scanning)

Identifying the companies strengths (core competencies)


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Three Inputs to a Business Strategy

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Developing an Operations Strategy

Operations Strategy is a plan for the design and management of operations functions

Operation Strategy developed after the business strategy

Operations Strategy focuses on specific capabilities which give it a competitive edge – competitive priorities


Operations Strategy – Designing the Operations Function


Competitive Priorities- The Edge

Four Important Operations Questions: Will you compete on –

Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?


Competing on Cost? Offering product at a low price relative to

competition Typically high volume products Often limit product range & offer little

customization May invest in automation to reduce unit costs Can use lower skill labor Probably use product focused layouts Low cost does not mean low quality


Competing on Quality? Quality is often subjective Quality is defined differently depending on who is

defining it Two major quality dimensions include

High performance design: Superior features, high durability, & excellent customer service

Product & service consistency: Meets design specifications Close tolerances Error free delivery

Quality needs to address Product design quality – product/service meets requirements Process quality – error free products


Competing on Time? Time/speed one of most important

competition priorities First that can deliver often wins the race Time related issues involve

Rapid delivery: Focused on shorter time between order placement and

delivery On-time delivery:

Deliver product exactly when needed every time


Competing on Flexibility? Company environment changes rapidly Company must accommodate change by

being flexible Product flexibility:

Easily switch production from one item to another Easily customize product/service to meet specific

requirements of a customer

Volume flexibility: Ability to ramp production up and down to match market

demands


The Need for Trade-offs Decisions must emphasis priorities that support

business strategy Decisions often required trade offs Decisions must focus on order qualifiers and order

winners Which priorities are “Order Qualifiers”? e.g. Must have excellent quality since everyone

expects it Which priorities are “Order Winners”? e.g. PIA, SHAHEEN & AIR BLUE VS EMIRATES

competes on cost McDonald’s competes on consistency FedEx TCS DHL competes on speed Custom tailors compete on flexibility


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OM’s Transformation Process


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OM’s Transformation Process AIM

To add value Increase product value at each stage Value added is the net increase between

output product value and input material value

Provide an efficient transformation Efficiency – means performing activities

well for least possible cost

Goods & Services

Services Intangible product Product cannot be

inventoried High customer

contact Short response

time Labor intensive

Manufacturing

Tangible product Product can be

inventoried Low customer

contact Longer response

time Capital intensiveOPERATIONS MANAGEMENT

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On the other hand…

Both use technology Both have quality, productivity, &

response issues Both must forecast demand Both will have capacity, layout, and

location issues Both have customers, suppliers,

scheduling and staffing issues Manufacturing often provides services Services often provides tangible goods


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Hybrid organizations

Some organizations are a blend of service/manufacturing/quasi-manufacturing Quasi-Manufacturing (QM) organizations

QM characteristics include Low customer contact & Capital Intensive



OM Decisions All organizations make decisions and follow a

similar path First decisions very broad – Strategic decisions

Strategic Decisions – set the direction for the entire company; they are broad in scope and long-term in nature.

Following decisions focus on specifics - Tactical decision Tactical decisions: focus on specific day-to-day issues

like resource needs, schedules, & quantities to produce are frequent

Strategic decisions less frequent Tactical and Strategic decisions must align

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OM Decisions

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Today’s OM Environment Customers demand better quality,

greater speed, and lower costs Companies implementing lean system

concepts – a total systems approach to efficient operations

Increased cross-functional decision making

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OM in Practice OM has the most diverse organizational function Manages the transformation process OM has many faces and names such as;

V. P. operations, Director of supply chains, Manufacturing manager

Plant manger, Quality specialists, etc. All business functions need information from OM

in order to perform their tasks Most businesses are supported by the functions

of operations, marketing, and finance The major functional areas must interact to

achieve the organization goals

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Business Information Flow

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Technology for Competitive Advantage

Technology has positive and negative potentials Positive

Improve processes Maintain up-to-date standards Obtain competitive advantage

Negative Costly Promotes dependency Risks such as overstating benefits

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Technology for Competitive Advantage

Technology should Support competitive priorities Can require change to strategic plans Can require change to operations strategy

Technology is an important strategic decision

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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 = (total output)/(total of all

inputs)

Partial Productivity Measure: Partial Productivity = (total output)/(single

input)

Multifactor Productivity Measure: Multi-factor Productivity = (total output)/(several

inputs)

Chapter 1 Operations Madnagement

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