Introduction to

Operations Management
What is Operations
Management?
Operations management is an area of business
that is concerned with the production of goods
and services, and involves the responsibility of
ensuring that business operations are efficient
and effective. It is also the management of
resources, the distribution of goods and services
to customers, and the analysis of queue systems.
 It is a management function

 Organization’s core function

 Every organization has OM function
 Service or Manufacturing
 For profit or Not for profit
Typical Organization Chart
What is Operations
Management Role?

 OM Transforms inputs to outputs

 Inputs are resources such as
 People, Material, and Money

 Outputs are goods and services

OM’s Transformation
Process
OM’s Transformation Role
 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 – perform activities well at lowest possible
cost
Differences between
Manufacturers and Service
Organizations
 Services:  Manufacturer
 Intangible product s:
 Product cannot be  Tangible product
inventoried  Product can be
 High customer inventoried
contact  Low customer
 Short response time contact
 Labor intensive  Longer response
time
 Capital intensive
Similarities-
Service/Manufacturers
 All use technology
 Both have quality, productivity, &
response issues
 All must forecast demand
 Each will have capacity, layout, and
location issues
 All have customers, suppliers,
scheduling and staffing issues
Service - Manufacturing
 Manufacturing often provides
services
 Services often provides tangible
goods
 Some organizations are a blend of
service/manufacturing/quasi-
manufacturing Quasi-
Manufacturing (QM) organizations
 QM characteristics include
 Low customer contact & Capital
Trends in OM
 Global
competitiveness
 Demands for
higher quality
 Huge technology
changes
 Time based
competition
 Work force
diversity
OM Decisions
 All organizations are based on
decisions
 Decisions 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
OM Decisions
 Tactical decisions focus on
 Specific day-to-day issues
 Resource needs, schedules, & quantities
to produce
 Tactical decisions are very frequent
 Strategic decisions less frequent
 Tactical decisions must align with
strategic decisions
OM Decisions
Why OM?
 For long-run success companies must
place much important on their
operations
 The 1950-1960 era was the U.S. golden era
where primary opportunities were
marketing
 The 1970-1980 U.S. companies experienced
a large decline in productivity growth –
international firms began to challenge in
many markets
 The 1970-1980 era saw U. S. firms lagging
behind in methods and processes
 The resurgence of American business in the
 Historical Development of
OM
 Industrial revolution Late 1700s
 Scientific management Early
1900s
 Human relations movement 1930s
to
1960s
 Management science Mid-
1900s
 Computer age 1970s
 Environmental Issues 1970s
 Historical Development of
OM
 Just-in-Time Systems (JIT) 1980s

 Total quality management (TQM)

1980s

 Reengineering 1990s

 Global competition
1980s


 Historical Development of
OM

 Time-Based Competition
1990s

 Supply chain Management

1990s

 Electronic Commerce
2000s

 Outsourcing and
 The Industrial Revolution
 The industrial revolution spread from
England to other European countries and
to the United Sates.
 The first great industry in the US was the
textile industry.
 In the 1800s the development of the
gasoline engine and electricity further
advanced the revolution.
 By the mid-1800s, the old cottage system
of production had been replaced by the
factory system.
Post-Civil War Period
 By post-Civil War the following
developments set the stage for the
great production explosion of the
20th century:
 increased capital and production
capacity
 the expanded urban workforce
 new Western US markets
 an effective national transportation
system
Scientific Management
 Frederick Taylor is known as the father of
scientific management. His shop system
employed these steps:
 Each worker’s skill, strength, and learning

ability were determined.

 Stopwatch studies were conducted to

precisely set standard output per worker on

each task.
 Material specifications, work methods, and

routing sequences were used to organize

the shop.
 Supervisors were carefully selected and
Scientific Management
 In the 1920s, Ford Motor
Company’s operation embodied
the key elements of scientific
management:
 standardized product designs
 mass production
 low manufacturing costs
 specialization of labor
 interchangeable parts
Human Relations and
Behavioralism
 In the 1927-1932 period, researchers in
the Hawthorne Studies realized that
human factors were affecting
production.
 Researchers and managers alike were
recognizing that psychological and
sociological factors affected production.
 From the work of behavioralists came a
gradual change in the way managers
thought about and treated workers.
 During World War II, enormous quantities
of resources (personnel, supplies,
equipment, …) had to be deployed.
 Military operations research (OR) teams
were formed to deal with the complexity of
the deployment.
 After the war, operations researchers
found their way back to universities,
industry, government, and consulting
firms.
 OR helps operations managers make
Today’s OM Environment
 Customers demand better quality,
greater speed, and lower costs
 Companies implementing lean systems
concepts – a total systems approach to
efficient operations
 Recognized need to better manage
information using ERP and CRM systems
 Increased cross-functional decision
making
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
Business Information Flow
OM Across the
Organization
 Most businesses are supported by
the functions of operations,
marketing, and finance
 The major functional areas must
interact to achieve the
organization goals
 Marketing is not fully capable of meeting
customer needs if they do not understand
what operations can produce
 Finance cannot judge the need for capital
investments if they do not understand
operations concepts and needs
 Information systems enables the information
flow throughout the organization
 Human resources must understand job
requirements and worker skills
 Accounting needs to consider inventory
management, capacity information, and labor
standards
OM in snacks
Location
Kind of customers they serve
Seating capacity
Prepared/ already preparing
How they take orders
Quality issue
Skilled work
Visibility