Operations ManagementOperations Management(Lecture 1)(Lecture 1)

Instructor:Instructor:Engr. Muhammad Asim Qureshi

Assistant ProfessorFatima Jinnah Women University

The Mall Rawalpindi

PhD Scholar Engineering Management (NUST), MS Engineering Management (NUST), MSc IT(University of

Glasgow UK), BSc (Hons) Engineering (UET Lahore)

e-mail: imaQ@ymail.com

ReferencesReferences Operations Management Operations Management

By Render and Heizer (8By Render and Heizer (8thth Edition) Edition) Productions and Operations ManagementProductions and Operations Management

By John Oakland, Keith Lockyer (6By John Oakland, Keith Lockyer (6thth Edition) Edition) Productions/Operations ManagementProductions/Operations Management

By William J.Stevenson (2By William J.Stevenson (2ndnd Edition) Edition) Research Papers/Newspaper Articles/Case Research Papers/Newspaper Articles/Case

StudiesStudies Lecture Slides and HandoutsLecture Slides and Handouts

Course ObjectivesCourse Objectives

By the End of this course By the End of this course

The student should understand the tradeoffs among different types The student should understand the tradeoffs among different types of goods and services operations systems in terms of key of goods and services operations systems in terms of key characteristics, management tasks, organization and control, and characteristics, management tasks, organization and control, and impact on the strategy and direction of the firm.impact on the strategy and direction of the firm.

The student should understand the strategic and tactical operations The student should understand the strategic and tactical operations management issues and their relationship to the other functional management issues and their relationship to the other functional areas of the firm.areas of the firm.

The student will gain experience employing and should be able to The student will gain experience employing and should be able to demonstrate a basic competence with the tools and techniques demonstrate a basic competence with the tools and techniques used by real-life operations professionals in managing operations used by real-life operations professionals in managing operations and setting operations policy.and setting operations policy.

Lecture ContentsLecture Contents

History of Operation ManagementHistory of Operation Management

Definitions of Operations Management (OM)Definitions of Operations Management (OM)

Terminology of OMTerminology of OM

Overview of Decisions in OMOverview of Decisions in OM

Significance of OM in ProductionSignificance of OM in Production

New Trends in OMNew Trends in OM

Productions and ProductivityProductions and Productivity

Productivity in Service SectorProductivity in Service Sector

History of Operations ManagementHistory of Operations Management

Until the end of the 18th century, agriculture was the predominant industry in every Until the end of the 18th century, agriculture was the predominant industry in every country. The advent of the steam engine and Eli Whitney's concept of standardized country. The advent of the steam engine and Eli Whitney's concept of standardized parts paved the way for the Industrial Revolution with its large manufacturing facilities parts paved the way for the Industrial Revolution with its large manufacturing facilities powered by steam or water. A number of countries (the United States included) powered by steam or water. A number of countries (the United States included) evolved from an agricultural economy to an industrial economy. But for a time, evolved from an agricultural economy to an industrial economy. But for a time, manufacturing was more of an art than a science. This changed with the introduction manufacturing was more of an art than a science. This changed with the introduction of Frederick W. Taylor's systematic approach to scientific management at the of Frederick W. Taylor's systematic approach to scientific management at the beginning of the twentieth century. The introduction of Taylor's method of scientific beginning of the twentieth century. The introduction of Taylor's method of scientific management and Henry Ford's moving assembly line brought the world into an age management and Henry Ford's moving assembly line brought the world into an age where management was predominantly centered around the production of goods. where management was predominantly centered around the production of goods.

In the late 1950s and early 1960s scholars moved from writing about industrial In the late 1950s and early 1960s scholars moved from writing about industrial engineering and operations research into writing about production management. engineering and operations research into writing about production management. Production management had itself become a professional field as well as an Production management had itself become a professional field as well as an academic discipline. As the U.S. economy evolved into a service economy and academic discipline. As the U.S. economy evolved into a service economy and operations techniques began to be incorporated into services the term operations techniques began to be incorporated into services the term production/operations management production/operations management came into use. Today, services are such a came into use. Today, services are such a pervasive part of our life that the term pervasive part of our life that the term operations management operations management is used almost is used almost exclusively. exclusively.

Operations ManagementOperations ManagementOperations management is the set of activities Operations management is the set of activities that creates goods and services by transforming that creates goods and services by transforming inputs into outputsinputs into outputs

Operations Management is responsible for the Operations Management is responsible for the management of productive systems, i.e. management of productive systems, i.e. responsible for systems that create goods or responsible for systems that create goods or provide services(or both). provide services(or both). W.J.StevensonW.J.Stevenson

OM: Conversion of Inputs to OM: Conversion of Inputs to OutputsOutputs

InputsTransformation

ProcessOutputs

ControlsFeedback Feedback

A GENERIC MODEL OF A GENERIC MODEL OF PRODUCTION SYSTEMPRODUCTION SYSTEM

TOTAL TRANSFORMATION

PROCESS

TOTAL INPUTS1. MEN

2. MATERAIL3. MACHINES

4. MONEY

TOTAL OUTPUTS

1. PRODUCTS

2. SERVICES

TOTAL TRANSFORMATION FROM INPUTS TO OUTPUTS

Inputs Process Outputs

Land, labour, capital

management

The economic system transforms inputs to

outputs to ensure annual increase in productivity. The

increase is the result of a mix of capital (1/6)

labour (1/6) and management (2/3)

Goods & Services

Economic System Transforms Inputs to Outputs

FEEDBACK LOOP

Transformation/Conversion Transformation/Conversion ProcessProcess

Change Inputs into Outputs through set of Change Inputs into Outputs through set of activities and functionsactivities and functionsTick the appropriate option?Tick the appropriate option? Human ResourceHuman Resource Teaching Teaching EducationEducation

Example of Types of OperationsExample of Types of Operations

PhysicalPhysical Farming, Mining, Construction, Manufacturing and Farming, Mining, Construction, Manufacturing and Power GenerationPower Generation

Storage/TransportationStorage/Transportation Warehousing, trucking, mail service, moving, taxis Warehousing, trucking, mail service, moving, taxis and busesand buses

ExchangeExchange Retailing, wholeselling, banking, renting or leasingRetailing, wholeselling, banking, renting or leasing

EntertainmentEntertainment Films, radio and television, plays, concerts, Films, radio and television, plays, concerts, recordingrecording

CommunicationCommunication Newspapers, radio, Telephone, internet, intranet, Newspapers, radio, Telephone, internet, intranet, satellitessatellites

Why OM?Why OM?One of the main functions of management One of the main functions of management How goods and services are produced?How goods and services are produced?How and what Operations Managers do?How and what Operations Managers do?Major cost element in manufacturing org.Major cost element in manufacturing org. Cost of goods soldCost of goods sold

Cost of raw materialCost of raw materialDirect labor costDirect labor costOperations costOperations costInventory carrying costsInventory carrying costsFinancial CostsFinancial Costs

Critical Decisions in OMCritical Decisions in OMForecastingForecastingProduct & Service DesignProduct & Service DesignQuality managementQuality managementProcess and Capacity DesignProcess and Capacity DesignLocationLocationLayout DesignLayout DesignHuman Resources and job designHuman Resources and job designSupply Chain managementSupply Chain managementInventory and Material Resource PlanningInventory and Material Resource PlanningSchedulingSchedulingMaintenanceMaintenance

Hierarchy of Operations Hierarchy of Operations Management DecisionsManagement Decisions

Strategic DecisionsProduct SelectionFacility Selection

Location and Layout

Tactical DecisionsEmployment Levels

Output LevelsEquipment Selection

Allocating Financial Resources

OperationalScheduling personnelAdjusting Output ratesControlling Qualities

Inventory Replenishment

Significance of OM in Business Significance of OM in Business OrganizationsOrganizations

OperationsOperationsFinance / AccountingFinance / AccountingMarketingMarketing

Management FunctionsManagement Functions PlanningPlanning OrganizationOrganization CoordinationCoordination Communication / MotivationCommunication / Motivation ControlControl

Three Major Functions of Business Three Major Functions of Business Organizations OverlapOrganizations Overlap

Operations

Marketing Finance

New Trends in OMNew Trends in OM

Global FocusGlobal Focus

Just-in-time shipmentsJust-in-time shipments

Supply Chain Management, ERP, E-Supply Chain Management, ERP, E-CommerceCommerce

Rapid Product Development – AlliancesRapid Product Development – Alliances

Mass Customization (world as market)Mass Customization (world as market)

Empowered employees, teams and lean Empowered employees, teams and lean productionproduction

Goods and ServicesGoods and Services

Services are usually intangibleServices are usually intangible

Services are often produced and consumed Services are often produced and consumed simultaneouslysimultaneously

Services are often uniqueServices are often unique

Services have high customer interactionServices have high customer interaction

Services have inconsistent product definitionServices have inconsistent product definition

Services are often knowledge basedServices are often knowledge based

Services are dispersedServices are dispersed

Table 1.3, 1.4 & Figure 1.4, 1.5Table 1.3, 1.4 & Figure 1.4, 1.5

Production and ProductivityProduction and Productivity

What do you know about production?What do you know about production?

What is productivity?What is productivity?

How the production can be controlled?How the production can be controlled?

How the productivity is increased?How the productivity is increased?

What factors influence production?What factors influence production?

What factors influence productivity?What factors influence productivity?

Productivity = Output

Input

Productivity increases when firms:

Become more Efficient; output increases with little or no increase in input.

Downsize: output remains the same and input is decreased.

Expand: both output and input grow with output growing more rapidly.

Retrench: both output and input decrease, with input decreasing faster, or

Achieve Breakthroughs: output increases while input decreases.

Note: With time as base and no compromise on quality

Productivity Variables-IProductivity Variables-I

LaborLabor contributes about 10% of the contributes about 10% of the annual increase in productivityannual increase in productivity

CapitalCapital contributes about 38 % of the contributes about 38 % of the annual increase in productivityannual increase in productivity

ManagementManagement contributes about 52 % of contributes about 52 % of the annual increase in productivitythe annual increase in productivity

Key variable of Key variable of laborlabor productivity productivity Basic education appropriate for effective labor Basic education appropriate for effective labor

forceforce Diet of the labor forceDiet of the labor force Social overhead – transportation and Social overhead – transportation and

sanitationsanitation

How How capital capital improves productivity?improves productivity?

How How managementmanagement improves productivity? improves productivity?

Productivity Variables-IIProductivity Variables-II

Productivity & the Service SectorProductivity & the Service Sector

Productivity in service sector has proven Productivity in service sector has proven difficult to improve because service sector difficult to improve because service sector work is:work is: Typically labor intensiveTypically labor intensive Frequently individually processedFrequently individually processed Often intellectual task performed by an expertOften intellectual task performed by an expert Often difficult to mechanizeOften difficult to mechanize Often difficult to evaluate for qualityOften difficult to evaluate for quality

Q & AQ & A