Intro to om

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Introduction to Operations

Management

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Definition

• Operations Management (OM)management of activities that lead to the creation of goods and services through the transformation of inputs to outputs

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Operations Management (Definition Contd…)

Operations management is an area of management concerned with overseeing, designing, and redesigning business operations in the production of goods and/or services.

It involves the responsibility of ensuring that business operations are efficient in terms of using as little resources as needed, and effective in terms of meeting customer requirements.

It is concerned with managing the process that converts inputs (in the forms of materials, labor, and energy) into outputs (in the form of goods and/or services).

The relationship of operations management to senior management in commercial contexts can be compared to the relationship of line officers to the highest-level senior officers in military science. The highest-level officers shape the strategy and revise it over time, while the line officers make tactical decisions in support of carrying out the strategy

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OM - Critical Decisions1. Managing quality2. Design of goods and services3. Process and capacity design4. Layout design5. Human resources6. Location strategies7. Supply-chain management8. Inventory management9. Scheduling10. Maintenance

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The Critical Decisions - 1

• Quality management– Who is responsible for quality?– How do we define quality?

• Goods and services design– What product or service should we offer?– How should we design these products and

services?

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• Process and Capacity design– What processes will these products require

and in what order?– What equipment and technology is

necessary for these processes?

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• Layout design– How should we arrange the facility?– How large a facility is required?

• Human resources and job design– How do we provide a reasonable work

environment?– How much can we expect our employees

to produce?

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• Supply chain management and JIT “Just-in-time” Inventory, Material Requirements Planning– Should we make or buy this item?– Who are our good suppliers and how many

should we have?– How much inventory of each item should

we have?– When do we re-order?

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• Immediate, short term, and project scheduling– Is subcontracting production a good idea?– Are we better off keeping people on the payroll during

slowdowns?

• Maintenance– Who is responsible for maintenance?

• Location– Where should we put the facility– On what criteria should we base this location

decision?

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PURE GOODSTangible

Can be storedProduction precedes

consumptionLow customer

contactCan be transported

Quality is evident

PURE SERVICESQuality difficult to judge

Cannot be transported

High customer contact

Production and consumption are simultaneous

Cannot be storedIntangible

Output of most Operations a Mixture of Goods and Services

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Goods Versus Services

Can be resold Can be inventoried Some aspects of

quality measurable Selling is distinct

from production

Reselling unusual Difficult to inventory Quality difficult to

measure Selling is part of

service

Goods Service

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Goods Versus Services (Contd...)

• Product is transportable• Site of facility important

for cost• Often easy to automate• Revenue generated

primarily from tangible product

• Provider, not product is transportable

• Site of facility important for customer contact

• Often difficult to automate

• Revenue generated primarily from intangible service.

Goods Service

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The Transformation Model

Input Transformed Resources

Input Transforming Resources

MaterialsInformationCustomers

FacilitiesStaff

TransformationProcess Customers

Input Resources Output Services+ Products

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Economic System Transforms Inputs to Outputs

Economic system transforms inputs to outputs at about an annual 1% increase in productivity:- capital 1/6 of 1%- labour 1/6 of 1%- management 2/3 of 1%

Land, Labour, Capital, Management

Goods and Services

Feedback Loop

Inputs Process Outputs

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Macro and Micro Operations

• Micro– An operation or process that can not be split

up into smaller operations and processes• Macro

– An operation or process that can be split up into smaller operations and processes

• All Macro operations are made up of many Micro operations

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Internal Customer Concept

• To treat internal suppliers and customers as if they were independent external organisations

• Each micro-operation should identify its internal customers and internal suppliers

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The Four V’s• Volume of demand

– How many the organisation makes– Service vs. Mass Production

• Variety in operations– The ability to adapt the transformation process to meet needs of

the customer– Taxi vs. Train

• Variation in demand– Adapting to changing demand

• Visibility of transformation– How much of the operations functions are visible to the customer– Some operations have mixed high/low visibility

eg Restaurant Front and Kitchen

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Variation

in DemandHigh Low

Television plant

Fast food restaurant

Routine surgery

Mass rapid transport

Electricity generator factoryGourmet restaurantPioneering surgeryTaxi service

Bespoke tailor

University tutorials

Corporate tax advice

Department store

Off-the-peg suit plant

University lectures

Financial audits

Jeans shop

Electricity utility

Financial audits

Emergency service

London underground

Bread bakery

Consultancy advice

Shopping mall security

Trucking operation

Health care "Cook at your table" restaurantDentistMusic teacher

Most manufacturingPrepackaged sandwichmakerDental techniciansDistance learning

High LowVisibility

VarietyHigh Low

VolumeLow High

A Typology of Operations

Intro to om

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