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An Introduction to Operations Management

Lecturer: Mrs J Botha

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Learning Objectives

1. Understand the definition of operations management.

2. Understand the transformation process

3. Contrast differences between services and goods producing processes.

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goods producing processes.

4. Define efficient and effective operations.

5. List the challenges faced by operations managers

Operations Management -Definition

• Operations management may be defined as the design, operation, and improvement of

the production system that creates the firm’s primary products and services.

• A production system is defined as a user of

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• A production system is defined as a user of resources to transform inputs into some

desired outputs.

“The internationalisation and globalisation of world markets

has forever changed the way that companies must conduct business.” (Kon Sera)

The consultancy services market The consultancy services market –– % of world revenues of 40 largest % of world revenues of 40 largest consultancy firmsconsultancy firms

Marketing/salesMarketing/sales22

FinancialFinancial66

Operations management is fashionable!Operations management is fashionable!

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Operations and process Operations and process managementmanagement

3131

Corporate strategyCorporate strategy1717

IT strategyIT strategy1717

Benefits/ActuarialBenefits/Actuarial1616

Organizational Organizational designdesign

1111

Process Steps for Men’s Nylon Supplex Parka

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Transformed Transformed

resourcesresources

•• MaterialsMaterials

•• InformationInformation

•• CustomersCustomers

OM Involves Managing Transformations

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CustomersCustomers

Transforming Transforming

resourcesresources

•• FacilitiesFacilities

•• StaffStaff

Input Input

resourcesresources

Output Output

products and products and

servicesservicesTransformation Transformation

processprocess

Outputs are products and services that Outputs are products and services that add value for customersadd value for customers

Transformed Transformed resourcesresources

•• Ingredients Ingredients •• Packaging Packaging •• CustomerCustomerss

Inputs and outputs at PrInputs and outputs at Prêêt a Mangert a Manger

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CustomersCustomers

Transforming Transforming resourcesresources

•• Equipment Equipment •• Fittings Fittings

•• StaffStaff

Input Input

resourcesresources

Served and Served and

satisfied satisfied

customerscustomers

Transformed Transformed resourcesresources

•• MaterialsMaterials•• InformationInformation•• CustomersCustomers

Operation’s Operation’s performanceperformance

Operations Operations strategystrategy

Operations Operations strategystrategy

Slack et al.’s model of operations Slack et al.’s model of operations managementmanagement

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CustomersCustomersInput Input

resourcesresources Output products Output products and servicesand services

Transforming Transforming resourcesresources

•• FacilitiesFacilities

•• StaffStaff

DesignDesign

Planning and Planning and controlcontrol

ImprovementImprovement

Operations Operations managementmanagement

Differences Between Services and Goods

1. Services are intangible

2. Services requires some interaction with the customer

3. Services are inherently

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3. Services are inherently heterogeneous

4. Services are perishable and time dependent

5. Services are defined and evaluated as a package of features

Performance objectives of goods and services

These are the basic things that customers want from

products they purchase or a service they receive.

� Quality

Dependability

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� Dependability

� Flexibility

� Speed

� Price (or production cost)

“Manufacturing operations is also in the service business, even if it is an

internal customer”

Value-Added Services

Value-added services differentiate the organization

from competitors and build relationships that bind

customers to the firm in a positive way.

� Information

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� Information

� Problem Solving

� Sales Support

� Field Support

“Link the shop floor worker to the customer”

The Goods-Services Continuum

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Servitization Strategies

• Servitization refers to a company building service activities into its product offerings for its current users– Maintenance, spare parts, training, and so

on

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on

• Success starts by drawing together the service aspects of the business under one roof

• Servitization may not be the best approach for all companies

International Growth in Services

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Efficiency, Effectiveness, and Value

• Efficiency: Doing something at the lowest possible cost

• Effectiveness: Doing the right things to create the most value for the company

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create the most value for the company

• Value: quality divided by price

Careers in Operations and Supply Management

• Plant manager

• Hospital

administrator

• Branch manager

• Business process improvement analyst

• Quality control manager

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• Branch manager

• Call center manager

• Supply chain

manager

• Purchasing

manager

manager

• Lean improvement manager

• Project manager

• Production control analyst

• Facilities manager

Historical Development of Operations and Supply Management

• Lean manufacturing, JIT, and TQC

• Manufacturing strategy paradigm

• Service quality and productivity

• Total quality management (TQM) and quality

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• Total quality management (TQM) and quality

certifications

• Business process reengineering

• Six-sigma quality

• Supply chain management

• Electronic commerce

• Service science

Challenges Facing Operations Managers

• Most products and systems are becoming more complex.

• Speeding up the time it takes to get new products into production.

• Developing flexible production systems to enable mass customization of products and services.

• Managing global production networks.

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• Managing global production networks.

• Developing and integrating new production technologies into existing production systems.

• Achieving high quality quickly and keeping it up in the face of restructuring.

• Successful management involves a team approach – integration of many specialised disciplines.

• Managing a diverse workforce.

• Conforming to environmental constraints, ethical standards, and government regulations.

Key Questions

1. What role should the operations function play in achieving strategic success?

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2. What are the performance objectives of operations and what are the internal and external benefits which derive from excelling in each of them?