Introduction to

Operations Management
 What is Operations
Management?
• Operations management is an area of management
concerned with overseeing, designing, and controlling the
process of production and redesigning business operations in
the production of goods or services.
• Operations management is the process of obtaining and
utilizing resources to produce useful goods and services, so as
to meet the goals of the organization.
Operations management focuses on carefully
managing the processes to produce and
distribute products and services. Major,
overall activities often include product
creation, development, production and
distribution. (These activities are also
associated with Product and Service
Management.)
A great deal of focus is on efficiency and
effectiveness of processes.
The management of systems or processes that create
goods and/or provide services.

◦ Planning

◦ Coordinating

◦ Executing
Ensure and allocating Produce goods or Assess consumer
financial resources services needs, and sell /
promote goods or
services
 Feedback

Inputs Outputs

Workers
Performanc
Managers Goods
e
Operations Services
Equipment
and
Facility processes
Materials
Land
Energy

Informatio
Lead time The time between ordering a good or service and
n
receiving it.
 OVERVIEW OF OPERATIONS
MANAGEMENT MODEL
Input: resources
raw materials
Output
machines
Transformation
personnel
Process Goods or
capital
Services
land/buildings
utilities
information
etc.

Control
 Feedback and Control

Physical Flow Information Flow

Measurements taken at various points in the transformation

process for control purposes are called feedback.

The process of comparing outputs to previously established

standards to determine if corrective action is needed is called
controlling
 Inputs
◦ 5 Ms
Man, Methods, Material, Machines, Money

 Transformation/conversion process
Cutting, machining, storing, transporting, investing,
analyzing
 Output
Goods/services

Value-added The difference between the cost of inputs

and the value or price of outputs.
Automobile factory
Input Output
steel, plastic Car
glass, paint
tools Transformation
equipment process
machines
personnel, buildings
utilities, etc.
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

Improvement of patients health condition

Table 1.2

Inputs Processing Outputs

Knowledge Lecturing Future

• Text Book Tutoring operations
• Lecture Notes Assignment managers
• Handouts Exam
• Course CD
• ……

Teaching Evaluation
 Central to the building of a brand name/reputation of the
company/firm, as a competitive weapon:
* High-quality product/service provider
* Low cost/good value producer/service provider (e.g.- Micromax)
* Fast delivery or response/lead time

 Improves the living standards of citizens and wealth of

nations:
* Has impact on GDP per capital
* High-value added
 Improves productivity:
* Effective control of the conversion process of inputs into
outputs (e.g., fewer defect output, less wastage of material
inputs, effective allocation of staff, will lead to more output
per unit time).
** Higher productivity leads to higher profits

 Improves our ability to meet customer needs:

* Ensure provision of high quality products and services at
reasonable prices (not just cheap output)
* Enables us to provide service to our target customers better
than our competitors
 Production Management

Production management deals with converting

raw materials into finished goods or products.
Production management means planning,
organising, directing and controlling of
production activities.
Production is defined as “the step-by-step
conversion of one form of material into
another form through chemical or mechanical
process to create or enhance the utility of the
product to the user.”
Characterstics of Production
system
1. Production is an organized activity, so every
production system has an objective.
2. The system transforms the various Inputs to
useful Outputs.
3. It doesn’t operate in Isolation from the other
organization system.
4. There exists a feedback about the activities,
which is essential to control and improve
system performance.
Difference between Production and
Operation Management
1. Output
Production Management handles manufacturing
of products while the operations management
covers both products and services.

2. Usage of Output
The use of products like computers, cars, etc.
can be made over a period whereas the
services need to be consumed immediately.
3. Categorization of work

To outturn products like cars or computers

more capital and fewer labor services are
required while in the operations department,
more workers and less money is needed.
4. Customer communication

There is no participation of clients during the

production phase,
whereas for services the client communication
is a must.

5. Decision Making
5. Decision Making
Related to the aspects of production wheras
while the operation management deals with
the regular business activities.

Dr Felton Lean
 What does
Operations Manger
Do?
Scope of Operations Management

 Operations Management includes:

◦ Forecasting
◦ Capacity planning
◦ Scheduling
◦ Managing inventories
◦ Assuring quality
◦ Motivating employees
◦ Deciding where to locate facilities
◦ And more . . .
 Forecasting: Weather, landing conditions, seat demands for
flights.
 Capacity Planning: How many number of planes in each route?
 Scheduling: Scheduling of planes for flights and for routine
maintenance, scheduling of pilots and flights attendants.
 Quality: Quality of the services, Safety.
 Forecasting: Demands for cars.

 Capacity Planning : Number of shifts, level of workforce.

 Inventory: Various component, parts.

 Scheduling: Scheduling of various types of cars, Scheduling

of workforce.
 Quality: Quality of products, services.
Responsibilities of Operations Manager

Planning Organizing
– Capacity
– Degree of centralization
– Location
– Process selection
– Products & services Staffing
– Make or buy
– Hiring/laying of
– Layout
– Use of Overtime
– Projects
Directing
– Scheduling
Controlling/Improving – Incentive plans
– Inventory – Division of work orders
– Quality – Job assignments
– Costs
– Productivity
Productivity

Productivity is measure of how much input is
required to produce a given output i.e the
ratio of output to input

Productivity is the output of any production
process, per unit of input.

To increase productivity means to produce
more with less.

In factories and corporations, productivity is a
measure of the ability to create goods and
services from a given amount of labour,
capital, materials, land, resources,knowledge,
time or any combination of those.

In factories and corporations, productivity is a
measure of the ability to create goods and
services from a given amount of labour,
capital, materials, land, resources,knowledge,
time or any combination of those.

Increase productivity on the part of capital
and labour.

A measure of the efficiency of a person,
machine, factory,system, etc., in converting
inputs into useful outputs.

Dr Felton Lean
Productivity Measurement
• Productivity can be measured, the amount of
output per unit of input.
• In a factory it might be measured based on
the number of hours it takes to produce a
good.
• While in service industry, might be measured
based on the income generated by an
employee divided his/her salary.
Dr Felton Lean
 Capital Markets, Stockholders

Finance
Purchasing

Personnel
Suppliers

Workers
Operations

Marketing

Customers
TYPES OF MANUFACTURING PROCESSES
 INTERMITTENT CONTINOUS

JOB BATCH MASS PROCESS

 JOB System

Batch
Production
Variety Intermittent Mass System
Continuous
System Production
Process
Production

Volume
 Goods are manufactured specially to fulfill orders made
by customers rather than for stock.
 Intermittent production system are those where the
production facilities are flexible enough to handle a
wide variety of products and sizes.
 Nature of inputs changes with the change in the design
of the product.
 In the intermittent production system, goods are
produced based on customer's orders. These goods are
produced on a small scale. The flow of production is
intermittent (irregular).
 Ex:- Machine shops, hospitals.
 Job production is the production of single complete
unit by one operator or group of operators. E.g.- Bridge
building, dam construction etc.
 Whole project is considered as one operation and work
is completed on each product before passing on to the
next.
 There is no assurance of continuous demand for
specific items.
 Versatile and skilled labour is needed.
 High capital investment.
 High unit cost of production.
Advantages: Disadvantages:
 Able to produce unique  Labor intensiveness
orders to meet and high costs
customers’ individual
needs.  High selling costs
 More likely to motivate  Not fit for mass
workers (see end production and large
results)
 Fairly simple way of demand
production(one a time)
 Production schedule can chalked out according to
specific orders or on the basis of demand forecast.
 Items are processed in lots or batches unlike job
production.
 In batch type system a new batch is undertaken for
production only when the work on all items of a batch
is complete.
 A batch is not passed to next operation until the work
on the previous operation is complete for the whole
batch and new batch enters the production line, till all
the operation for manufacturing any product are
complete.
Advantages: Disadvantages:
 Suitable for a wide  Higher unit costs for
range of similar small batch
 Less motivated
products workers for repetitive
 Reducing the need for one operation
skilled workers  Careful planning
 More standardized needed to reduce idle
machines or worker
products waiting
 These are also referred to as Repetitive Manufacturing
Systems.
 These are mass production facilities that produce high
volumes of the same products.
 The manufacturing happens in Automated, special-purpose
equipments.
 Production is done on the basis of sales forecast and stock
position..
 Product(s) follow the same path:
 Process manufacturing is the production of goods by
combining supplies, ingredients or raw substances
using a formula or recipe. Examples of process
manufacturing goods include food, beverages, refined
oil, gasoline, pharmaceuticals, chemicals and
plastics.When is it used:
– Dedicated plant and equipment with zero flexibility
– Material handling is fully automated.
– Process follows a predetermined sequence of operations
– Product differentiation is limited.
– Involves high initial investments.
Ex:- Chemical plant, Oil and Gas, Petroleum refineries, Sugar
mills, etc.
Mass production refers to the process of creating large
numbers of similar products efficiently.
 When is it used:
– Standardization of product and process sequence
– Dedicated special purpose machines having high
production capacities and output rates
– Large volume of products.
– Material and parts flow is continuous.
– Production planning and control is easy.
– Material handling can be completely automatic.