Lecture 1

Manufacturing can be defined as:

1. The process of converting material into a more useable
form
2. The process of adding value to an existing product
3. Products may be discrete or continuous
4. A complex activity involving a wide variety of
resources and activities

5.

6.

Production quantity number of units of a given part

that are produced annually:
Low
Medium
High
Product Variety different type of products that are
produced at a facility

It is an organized activity, so every manufacturing

system has an objective
The system transforms the various inputs into useful
outputs
It does not operate in isolation from the other
organization system
There exists a feedback about the activities which is
essential to control and improve system performance

Production machines, tools, fixtures and other related

hardware
Material handling system
Computer systems to coordinate and/or control the
components
Human Workers

An economic activity that typically produce an

intangible product such as:
1. Education
2. Entertainment
3. Lodging
4. Government
5. Financial Services
6. Health Services

It is an organized activity related to identifying the

customer specific to the service being provided
The effective communication and provision of the
service in terms of its utility and quality
There exists a feedback about the changes/
improvements which are needed to satisfy the
customers

Goods
Tangible
2. Produced but may be
consumed after a while
3. Can be resold
1.

4.

Can be inventoried

Aspects of quality are

measurable
6. Selling is distinct from
production
5.

Services
1. Intangible
2. Produced and consumed
simultaneously
3. Reselling a service is
unusual
4. Many services cannot be
inventoried
5. Many aspects of quality
are difficult to measure
6. Selling is often a part of
the service

Goods
7. Product is transportable
Site of facility is
important for cost
9. Often easy to automate
8.

10.Product

is or good is
generally common
11.Less customer
interaction

Services
7. Provider not product is
often transferrable
8. Site of facility is important
for customer contact
9. Service is often difficult to
automate
10.Service is often unique
11.High

customer interaction

It involves understanding the needs of our

customers, managing the processes that
deliver the services, ensuring our objectives
are met, while also paying attention to the
continual improvements of our services.
[Johnston & Clark, 2008:3]

 Operations

management is the effective and

efficient management of the transformation
process [Melnyk & Denzler, 1996:5].
..operations are processes that take in a set of
input resources which are used to transform
something, or are transformed themselves, into
outputs of products and services. (Slack,
2010:11).

The ongoing activities of designing, reviewing and

using the operating system, to achieve service outputs
as determined by the organization for customers.
It is the business function that plans, organizes, coordinates, and controls the resources needed to produce
a companys goods and services.

Purchasing managers
Supply chain and logistics managers
Customer service managers
Project managers
Quality managers
Restaurant, hotel, retail, & airport managers
Health centre managers, hospital managers
Head teachers, etc., etc..

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Automobile assembly factory Operations

management uses machines to efficiently
assemble products that satisfy current
customer demands
Physician (general practitioner) Operations
management uses knowledge to effectively
diagnose conditions in order to treat real
and perceived patient concerns
Management consultant Operations
management uses people to effectively
create the services that will address current
and potential client needs

Disaster relief charity Operations

management uses our and our partners
resources to speedily provide the supplies and
services that relieve community suffering

Advertising agency Operations

management uses our staff s knowledge and
experience to creatively present ideas that
delight clients and address their real needs

1. Operations management is the activity of managing the

resources which produce and deliver products and services. The
operations function is the part of the organization that is
responsible for this activity.
2. Every organization has an operations function because every
organization produces some type of products and/or services.
However, not all types of organization will necessarily call the
operations function by this name. (Note that we also use the
shorter terms the operation and operations interchangeably
with the operations function).
3. Operations managers are the people who have particular
responsibility for managing some, or all, of the resources which
compose the operations function. Again, in some organizations
the operations manager could be called by some other name. For
example, he or she might be called the fleet manager in a
distribution company, the administrative manager in a hospital,
or the store manager in a supermarket.

Operations in the organization

Operations management is just as important in small

organizations as it is in large ones. Irrespective of their size,
all companies need to produce and deliver their products and
services efficiently and effectively.
In practice, managing operations in a small or medium-size
organization has its own set of problems. Large companies
may have the resources to dedicate individuals to specialized
tasks but smaller companies often cannot, so people may
have to do different jobs as the need arises.

Such an informal structure can allow the company to

respond quickly as opportunities or problems present
themselves. But decision making can also become
confused as individuals roles overlap.
Small companies may have exactly the same
operations management issues as large ones but they
can be more difficult to separate from the mass of other
issues in the organization. However, small operations
can also have significant advantages;

Terms such as competitive advantage, markets and business

are usually associated with companies in the for-profit sector.
Yet operations management is also relevant to organizations
whose purpose is not primarily to earn profits. Managing the
operations in an animal welfare charity, hospital, research
organization or government department is essentially the same
as in commercial organizations.
Operations have to take the same decisions how to
produce products and services, invest in technology,
contract out some of their activities, devise performance
measures, and improve their operations performance and so
on.

More complex and involve a mixture of

political,
economic,
social and
environmental objectives
a greater chance of operations decisions being made under
conditions of conflicting objectives. So, for example, it is the
operations staff in a childrens welfare department who have
to face the conflict between the cost of providing extra social
workers and the risk of a child not receiving adequate
protection.

As the Operations Manager you will be a key

member of the management team, supporting the
General Manager to ensure that the centre runs
smoothly
and
efficiently
by
improving
profitability
Specific responsibilities include:
stock management, customer service, financial
performance, health and safety, facilities and HR.
You will directly manage and develop a small team
which will include general assistants, a stock
controller and a goods inwards assistant.

Main responsibilities:
Delivering efficient stock & product management &
leading and managing staff efficiently whilst
adhering to LEAN Management Principles
Setting and reviewing staff targets, to deliver
continual improvement.
Fleet Management and the organization of the
delivery drivers routes in line with the LEAN
Management Principles
Managing couriers efficiently to the benefit of the
Company

Finance: This area is responsible for securing financial

resources at favorable prices and allocating those resources
throughout the organization.
Marketing: This area is responsible for assessing consumer
wants and needs, and selling and promoting the
organizations goods or services.
Operations: This area is responsible for producing the
goods or providing the services offered by the organization.
In other words the role of operations management is to
transform a companys inputs into the finished goods or
services.

ORGANIZATION

Finance

Operations

Marketing

It involves:
Inputs: That is capital, labor, land and
information
Transformational Processes: That is
storing, transporting, cutting etc.
Outputs: That is goods and services.

The essence of the operations function is to

add value during the transformation
process.
Value Added: It is the term used to
describe the difference between the cost of
inputs and the value or price of outputs.
or
The
net increase created during the
transformation of inputs into final outputs.

Firms use the money generated by value-added

for
Research and development,
Investment in new facilities and equipment,
Worker salaries, and,
Profits.

The volume of their output;

The variety of their output;
The variation in the demand for their output;
The degree of visibility which customers have of the
production of their output.

The essence of high-volume burger production is McDonalds,

which serves millions of burgers around the world every day.
The first thing you notice is
the repeatability of the tasks people are doing and the
systematization of the work where
standard procedures are set down specifying how each part of the
job should be carried out.
Also, because tasks are systematized and repeated, it is
worthwhile developing specialized fryers and ovens.
All this gives low unit costs.

Now consider a small local cafeteria serving a few short-order

dishes.
The range of items on the menu may be similar
the volume will be far lower,
so the repetition will also be far lower and
the number of staff will be lower (possibly only one person) and
therefore individual staff are likely to perform a wider range of
tasks.
This may be more rewarding for the staff, but less open to
systematization.
Also it is less feasible to invest in specialized equipment.
So the cost per burger served is likely to be higher (even if the
price is comparable).

A taxi company offers a high-variety service. It is prepared

to pick you up from almost anywhere and drop you off
almost anywhere.
To offer this variety it must be relatively flexible.
Drivers must have a good knowledge of the area, and
communication between the base and the taxis must be effective.
However, the cost per kilometre travelled will be higher for a taxi
than for a less customized form of transport such as a bus service.
Although both provide the same basic service (transportation), the
taxi service has a high variety of routes and times to offer its
customers, while the bus service has a few well-defined routes, with
a set schedule. If all goes to schedule, little, if any, flexibility is
required from the operation.

All is standardized and regular, which results in

relatively low costs compared with using a taxi for the
same journey.

Consider the demand pattern for a successful summer

holiday resort hotel.
At the height of the season the hotel could be full to its capacity.
Off-season demand, however, could be a small fraction of its
capacity. Such a marked variation in demand means that the
operation must change its capacity in some way.

Compared with a hotel of a similar standard with level

demand.
A hotel which has relatively level demand can plan its activities well
in advance. Staff can be scheduled, food can be bought and rooms
can be cleaned in a routine and predictable manner. This results in a
high utilization of resources and unit costs which are likely to be
lower than those in hotels with a highly variable demand pattern.

Visibility is a slightly more difficult dimension of operations to envisage.

how much of the operations activities its customers experience, or
how much the operation is exposed to its customers.

Generally, customer-processing operations are more exposed to their

customers than material- or information-processing operations. But even
customer processing operations have some choice as to how visible they
wish their operations to be.
For example, a retailer could operate

high-visibility bricks and mortar. In the bricks and mortar,

high-visibility operation, customers will directly experience most of its value-adding

activities. Customers will have a relatively short waiting tolerance, and may walk out
if not served in a reasonable time.
Customers perceptions, rather than objective criteria, will also be important.
If they perceive that a member of the operations staff is discourteous to them, they are
likely to be dissatisfied (even if the staff member meant no discourtesy), so highvisibility operations require staff with good customer contact skills.
Customers could also request goods which clearly would not be sold in such a shop,
but because the customers are actually in the operation they can ask what they like!
This is called high received variety.
This makes it difficult for high-visibility operations to achieve high productivity of
resources, so they tend to be relatively high-cost operations.

 Lower-visibility web-based operation

Conversely, a web-based retailer, while not a pure low-contact
operation, has far lower visibility.
Time lag between the order being placed and the items ordered by
the customer being retrieved and dispatched does not have to be
minutes as in the shop, but can be hours or even days.
This allows the tasks of finding the items, packing and dispatching
them to be standardized by staff who need few customer contact
skills. Also, there can be relatively high staff utilization.

Understanding the operations strategic performance objectives.

The first responsibility of any operations management team is to understand
what it is trying to achieve. This means understanding how to judge the
performance of the operation at different levels, from broad and strategic to more
operational performance objectives.
Developing an operations strategy for the organization.
Operations management involves hundreds of minute-by-minute decisions, so it
is vital that there is a set of general principles which can guide decision-making
towards the organizations longer-term goals. This is an operations strategy.
Designing the operations products, services and processes.
Design is the activity of determining the physical form, shape and composition
of products, services and processes. It is a crucial part of operations managers
activities.

Planning and controlling the operation.

Planning and control is the activity of deciding what the operations resources
should be doing, then making sure that they really are doing it.
Improving the performance of the operation.
The continuing responsibility of all operations managers is to improve the
performance of their operation.
The social responsibilities of operations management.
It is increasingly recognized by many businesses that operations managers have
a set of broad societal responsibilities and concerns beyond their direct activities.
The general term for these aspects of business responsibility is corporate social
responsibility or CSR. It should be of particular interest to operations managers,
because their activities can have a direct and significant effect on society.

Type of Operations
Goods Producing

Storage/
Transportation

Exchange

Entertainment

Communication

Examples
Farming, mining, construction,
manufacturing, power generating.
Warehousing, Trucking, mail
service, moving, taxis, buses,
hotels, airlines
Retailing, Wholesaling, financial
advising, renting, leasing, library
loans, stock exchanges.
Films, radios, television plays,
concerts
Newspapers, TV newscasts
telephone, satellites, the internet

The operations function include all the

activities directly related to producing
goods or providing services
Goods-Oriented:
It
exists
both
in
manufacturing and assembly operations.
Service-Oriented: Include areas such as
health care, transportation, food handling,
and retailing

System design involves decisions that relate to:

System capacity
The geographic location of facilities
Arrangement of departments
Placement of equipment within physical structure
Product and service planning
Acquisition of equipment

Decision Area

Basic Issues

Product and service design

Customer demands,
improvement of products

Capacity

Capacity needed and how the

organization best meet
capacity requirements.

Process Selection

What process should the

organization use?
What is the best arrangement
for departments, equipment?

Process Layout

Decision Area

Basic Issues

Design of work
systems

What is the best way to

motivate employees? How can
productivity be improved?

Location

What is the satisfactory

location of the facility/store,
etc.?

Tactical/Operational
Decisions:
Such
decisions are specific and short-term in
nature and are bound by strategic
decisions.
Such decisions typically pertain to the
system operation.

System operations involve decisions that relate to:

Management of personnel
Inventory planning and control
Scheduling
Project management
Quality assurance

Decision Area

Quality

Quality Control

Supply Chain Management

Inventory Management

Aggregate Planning

Basic Issues
How is quality defined? How are
quality goods achieved and
improved?
Are processes performing
adequately? What standards
should be used?
How to achieve effective flows of
information and goods throughout
the chain?

How much to order? When to

reorder? Which items should get the
most attention?

How much capacity will be needed

over the intermediate range?

Strategic Decisions

Tactical/Operational Decisions

Broad in scope
Long-term in nature
All-encompassing

Narrow in scope
Short-term in nature
Concerning a small group of issues

e.g., What are the unique features

of our product that make us
competitive?

e.g., Who will work the 2nd Shift

tomorrow?

The operations manager is more involved in day-to-day

operating decisions than with decisions relating to system
design.

However, the operations manager has a vital stake in

system design because system design essentially
determines many of the parameters of system operation.

1.

Purchasing: It has the responsibility for procurement of

materials, supplies, and equipment.
Close contact with operations is necessary to ensure
correct quantities and timing of purchases.
The purchasing department is often called on to evaluate
vendors for quality, reliability, service, price, and ability
to adjust to changing demand.
Purchasing is also involved in receiving and inspecting
the purchased goods.
Contd.

2.

3.
4.

Industrial Engineering: It is often concerned with

scheduling, performance standards, work methods, quality
control, and material handling.
Distribution: It involves the shipping of goods to
warehouses, retail outlets, or final customers.
Maintenance: It is responsible for general upkeep and
repair of equipment, buildings and grounds, heating and
air-conditioning, removing toxic wastes, parking and
perhaps security.

Organization:
Operations is the core function of an organization.
Provide primarily services or create goods.
Responsible for creating those goods or providing services.
Major portion of the assets in most business organizations.

Society:
More than half of all employed people in most
countries have jobs in operations.
Providing services and, the consumption of these goods
and services is an integral part of our society.

The Interrelated Activities:

o Forecasting
o Capacity planning
o Scheduling
o Managing inventories
o Assuring quality
o Motivating and training employees

Forecasting
Weather and landing conditions
Seat demand for flights
Growth in air travel

Capacity Planning
Ensuring the maintenance of cash flow and
generating reasonable profit.
The adjustment of flight timings and
destinations that could maximize profits.

Scheduling
Maintenance of flight schedule
Schedules of on duty pilots and flight
attendants
Scheduling of ground crews, counter staff,
and baggage handlers.

Managing Inventories
Managing inventories such as:
Foods and beverages
First-aid equipment
In-flight magazines
Pillows and blankets
Life preservers

Assuring Quality
Quality Assurance: It is essential in flying
and maintenance operations.
Emphasis

safety
dealing with customers at ticket counters,
check-in,
telephone,
electronic reservations and
taxi service where the emphasis is on efficiency
and courtesy.

Motivating and Training Employees

Employee motivation and training in all
phases of operations.

Locating Facilities
Locating facilities according to managers
decisions on which cities to provide service
for, where to locate major and minor hubs.

The operations function consists of all

activities directly related to producing goods
or providing services. Such activities include:
1. Development of idea for a product or service
2. Product verification and funding
3. Product Development
4. Product Production
5. Product Distribution
Contd.

Operations Management involves:

Product and Service design
Process selection
Selection and management of technology
Design of work systems
Location planning
Facilities planning
Quality improvement of the organizations
products and services

to develop your knowledge and understanding key

principles, concepts & processes associated with
operational planning, control and improvement of
efficiency of business operations.
to deepen your understanding of the strategic
importance of operations management for
competitive success in a global economy.

Journal of Operations Management

International Journal of Operations & Production Mgt
International Journal of Quality and Reliability Mgt
International Journal of Productivity & Performance Mgt
Managing Service Quality
Total Quality Management
Total Quality Management and Business Excellence
The Service Industries Journal
The TQM Magazine

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