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Introduction to Operations Management

• Objectives of lecture:– To understand what is operations management– Describe the role of OM within the organisation– To understand the relationship between operations

management and the division of labour– To know the constitutive elements of an operation

system– To discuss the difference between products and

services

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What is Operations Management?

• OPERATIONS MANAGEMENT is the design and operations of production/service systems

• Without operations management:– A normal queue at a bank would take 1 to 2 hours …– A 3 hours ferry crossing could require 9 hours, if not

several days!– The Eurostar would take 15 hours to go from London to

Paris…– Mail would rarely be delivered…

• In other words:– Unless we could totally revise our every day’s perceptions

of time and performance…– … we could not live in such a world

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Contemporary Issues

• Shift in balance of power to consumers– Achieving higher levels of productivity

• Creating higher quality products• Delivering better customer service• Achieving shorter delivery times• Reducing labor and material costs

• Globalization of business and markets• E-commerce

• From a primary sector to a secondary sector economy• From a manufacturing to a service economy• E-service economy• Case of developing economies: can we leap-frog the

manufacturing stage?

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International Division of Labour

Source: From Joseph E. Stiglitz, Principles of Micro-economics, 2nd ed. (New York: W.W. Norton and Company, 1997), p. 58.

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The Value Chain and Its Support Functions

Role of OM within an Organisation

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Division of Labour

• The objective is to specialise jobs by reducing them to their most elementary tasks

• Results from the simultaneous application of two principles– horizontal division of labour

• (Smith, Babbage)

– vertical division of labour • (Taylor, introduction of management science; Gilbreth, time and

motion studies)

• The vertical division of labour implies:– A design and planning activity– A control activity– A co-ordination role for operations management

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The Transformation Process within OM

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Input-Transformation-OutputRelationships for Typical Systems

Components are also called resources

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GoodGood

OM and the Service Industry

• Application of OM to Service Operations– Batch cooking operations at McDonald’s– Telephone Banking– Call Centres

ServiceServiceProductProduct

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Most Products Are a “Bundle” of Goods and Services

Exhibit 1.8Exhibit 1.8

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1-6

Differences Between Goods and Services

• Goods– Tangible– Can be

inventoried– No interaction

between customer and process

• Services– Intangible– Cannot be

inventoried– Direct interaction

between customer and process

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Product Delivery Systems

• Manufacturing Processes - customer are separate from the place of production both geographically and in terms of time– Exceptions: B2B transactions

Manufacturing

processMaterials Goods Customer

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Service Delivery Systems

• There are two basic structures of service delivery system.....– 1. where customers participate– 2. where customers' goods are processed

deliveryService

system

Servicedeliverysystem

CustomerCustomer

Goods

ProcessedGoods

Customer

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Front & Back Office

Key feature of service industry. Nowadays front and back offices are often separated geographically - and may even be in different continents

Back OfficeCustomers

Front Office - Servers(receptionist / dispatcher /

cashier etc.)

Division of labour

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Suggested Homework

• Is a public service (e.g. land registry, customs, ONE) an operations system?– How does it differ from a business operations

system?

• Question 1-2 p. 27• Have the globalisation of operations taken place

yet in Morocco? How, Why, Examples?• Question 1-8 p. 27• Question 1-15 p. 27• Case Problem 1.2 p. 29