Operations Management

Week 1

Adeel Akmal
[email protected]

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This week’s focus
• What is operations management?
• Why is operations management important in all types of organisations?
• What is the input–transformation–output process?
• What is the process hierarchy?
• How do operations (and processes) differ?

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Part 1 The basics

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Organisations (and your studies) in a nutshell
• This is how an organisation, a company, an enterprise, is
organised.
• You have hierarchies.
• Employees, assistants, managers, presidents…
• You have departments.
• Sales, Marketing, Human Resources, Finance,
Accounting, Administration, Operations
Management, Procurement…
• You, as a student, are learning many of these lines of study.
• One of them is Operations Management.
• This class is about that.

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Operations management
• What do organisations do?
• They create value to customers in the shape of goods and services (or both).

Pure product Pure service

Computer A TV with Gym Food Spotify

Hardware warranty services membership Catering

Operations management is the activity of managing the

resources that create and deliver services and products.
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Operations management
• Why do we need operations management?
• Efficiency: Doing things right.
• Minimising waste and reducing costs.
• Streamlining processes, enhancing productivity, utilizing technology.
• Effectiveness: Doing the right things.
• Aligning operations with customer needs and expectations.
• Adapting to market changes, innovations in offerings, long-term planning/forecasting.

Operations management is the art and science of balancing

efficiency and effectiveness to excel in both spheres.

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Efficiency vs. effectiveness: A trade-off
• Excessive Efficiency
• Prioritizing speed and cost-cutting to the extent that the quality of the product or
service is compromised.
• Over-automation can lead to a lack of personal touch in customer service.
• Excessive cost-cutting may reduce product quality.
• Overemphasis on process speed might result in employee burnout and high turnover rates.
• Excessive Effectiveness
• Over-focusing on achieving goals without regard to resource use, which can lead to
unsustainable practices.
• Launching too many initiatives without adequate resources can strain staff and budgets.
• Over-customization to meet every customer's need leads to complexity and increased costs.
• Ignoring cost considerations in the pursuit of quality can result in overpricing products.

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Operations function
• Every organisation has an operations function because every
organisation creates some type of service and/or product.
• Other functions include sales/marketing and product/service development
function.
• Operations function comprises of all the activities necessary for the
day-to-day fulfilment of customer requests within the constraints of
social and environmental sustainability.
• Sourcing services and products from suppliers and delivering services and
products to customers.

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Examples of operations functions

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Operations function: Food catering
• Menu Planning and Design.
• Sourcing of ingredients and vendors.
• Food production and preparation.
• Quality control.
• Logistics and delivery.
• Event setup/service.
• Staffing and workforce management.

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 Operations functions and supply chain design
Org A Develop Supply Source Produce Deliver Market Sell Service

Org B Develop Supply Source Produce Deliver Market Sell Service

Mcdonalds Develop Supply Source Produce Deliver Market Sell Service

Auto Develop Supply Source Produce Deliver Market Sell Service

Operations function: Where is the cut-off?

Operations Product Sales/Marketing

function development function
function

• You might think that there are strict boundaries between the operations and the rest
of the organisational function.
• Operations coordinates with product development function to understand the
feasibility of manufacturing—focusing on aspects like material sourcing,
production capability, and cost implications.
• Uses this demand forecast (done by sales function) to plan production volumes,
ensuring that the manufacturing process is aligned with market expectations.
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Scenario 1
Finance function is asking sales
to generate more income, but
nobody wants product B.
Sales function wants to
sell product A but
production department
suggest product B.

Procurement needs more

money to increase
inventories for product A.
Production department needs raw
materials for product A but
procurement function has inventories
of raw materials for product B.

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Why is operations management important?
• Why do organisations exist?
• To create value.
• Toyota—make cars.
• Dominos—Pizza.
• Spotify—Music streaming.
• Hama—Food for university members.
• Doctors without borders—Access to healthcare.

Can you think of any type of organisation that may not

need operations or an operations function?

Any business that creates something must use resources to do so, and so must have an operations activity.

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How to spot the operations function?
• Look for the word “create”.
• How is the organisation creating value.
• Is it a product or a service?
• Have a think about:
• A Tech Startup developing software.
• An E-commerce retailer (like Amazon).
• An advertisement agency.

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Part 2 Processes

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Input-Transformation-Output
• The crux of operations management is:

Input Transformation Output

Activities

• A series of actions or steps taken to achieve a specific outcome.

• Inputs—Raw materials or information we start with.
• Activities—The steps we perform using these inputs.
• Outputs—The final result, product, or service we deliver.
• Feedback—The quality of the output. Think of it as a taste-test.

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All processes have inputs of transforming and transformed resources
that they use to create products and services.

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Transforming and transformed resources
• Transforming Resources
• These are the resources that act upon the transformed resources. They
primarily include facilities and staff.
• Machinery in a factory, computers in an IT company.
• Employees who operate machines, provide services, or perform operations tasks.
• Transformed Resources
• These are the resources that are acted upon to create the final product or
service. They include materials, information, and customers.
• Raw materials in a manufacturing process, like steel in car production.
• Customer information in a service operation, such as patient records in a hospital.
• Individuals who are part of the service process, like students in this classroom.

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Processes
• Understanding and improving processes
is the key to improving productivity.
• You can’t improve what you don’t know.
• Operations management provides you with the
mindset and the tools for improvement.

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 Factory Hospital Supermarket

• Think about the inputs (transforming and transformed resources in the processes.
• Which of those are dominant and which of these are supporting resources?

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Different inputs, different industries

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What is being transformed?
• Where should we focus more attention?
• What is important to provide value to customers?
• To a five-star hotel, its facilities consist mainly of ‘low-tech’ buildings, furniture and
fittings.
• To a nuclear-powered aircraft carrier, its facilities are ‘high-tech’ nuclear generators and
sophisticated electronic equipment.

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Front office vs back office
• The front-office (or ‘front-of-house’) parts of an operation are those
processes that interact with (transform) customers. ‘the low-visibility
part of an operation.
• Our classroom is front office.
• Back-office (or ‘back-of-house’) operations are the processes that
have little or no direct contact with customers, but perform the
activities that support the front office in some way.
• The admin dealing with your student forms, maintaining classrooms,
answering enquiries, Hama, and everything else in the university is the back
office.

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The outputs

Pure product Pure service

Computer A TV with Gym Food Spotify

Hardware warranty services membership Catering

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Examples of outputs

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The outputs: IHIP explained
• Intangibility
• Services are intangible and cannot be touched or stored. This contrasts with the
tangible nature of products.
• Implication: Emphasis on customer experience and service quality."
• Heterogeneity (Variability)
• Services are highly variable, depending on who provides them and when.
• Implication: Focus on staff training and maintaining consistent service standards.
• Inseparability:
• Production and consumption of services are often inseparable, occurring
simultaneously.
• Implication: The importance of real-time customer interaction and feedback.
• Perishability:
• Services cannot be stored or inventoried, unlike physical products.
• Implication: Managing demand and supply through scheduling and capacity planning.

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Knowing where we stand on a product-service continuum matters
because it helps us design our operations better.

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SIPOC
• SIPOC is an acronym.
• Suppliers, inputs, process, outputs, customers.
• Consider it an ‘extended’ version of the input-transformation-output.
• It is a method of formalising a process at a relatively general rather than a
detailed level.
• It helps all those involved in the process to understand (and, more important,
agree) what it involves and where it fits within the business.
• It can prompt important questions that can sometimes be overlooked.

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Example of a SIPOC

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Process Hierarchy
• At its core, operations management is about designing, overseeing,
and improving processes.
• Processes at each level of the ‘operations’.
• What is a process?
• A ‘process’ is an arrangement of resources and activities that transform inputs
into outputs that satisfy (internal or external) customer needs.
• They are the ‘building blocks’ of all operations, and they form an ‘internal network’
within an operation.
• A ‘process’ is a series of actions or steps taken to achieve a particular end.
• In operations, these processes transform inputs (like labor, materials, and information)
into outputs (goods or services).
• Think about the breakfast example.

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Process Hierarchy
• Let’s think about a chair.
Overall Process: Converting raw materials into finished chairs.
First-Level Operations: Wood Preparation
Process: Cutting and Shaping Wood
Second-Level Operations: Assembly
Process: Assembling the Chair
Third-Level Operations: Finishing
Process: Sanding and Varnishing
Fourth-Level Operations: Upholstery.
Process: Adding Upholstery
Final Stage: Quality Check and Packaging
Process: Inspection and Packaging

This is called the process hierarchy. 35

Process Hierarchy.
• A process can act as a smaller version of the whole operation of
which it forms a part.
• Each process is, at the same time, an internal supplier and internal customer
for other processes.

A B C D E F

Process B is the supplier for Process C Process E is the customer for Process D

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Examples of processes in different operations

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Part 3 Observing Operations

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How do operations (and processes) differ?
• Different organisations have different objectives.
• Hence, different operations.
• You can tell a lot about the organisation by looking at their operations.
• For this purpose, we use the 4V framework.
• Volume (How much are they producing?)
• Variety (How much uniformity is in the produced outcomes?)
• Variation (How the demand is placed on the operations over a time period)
• Visibility (How much of the activities the customers experience?)

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Volume
• Volume refers to the quantity of goods or services produced.
• High volume – Assembly line production of smartphones.
• High volume operations often lead to economies of scale and lower cost per unit, but
with less flexibility.
• Low volume – Handmade custom jewellery.
• Low volume allows for customization but can be more expensive.

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Variety
• Variety is the diversity in the products or services offered.
• High variety - A restaurant with an extensive menu.
• High variety operations require flexible systems and can have higher costs,
• Low variety - A fast-food chain with a limited menu.
• Low variety can benefit from standardized processes.

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Volume vs. Variety matrix
High

Continuous
Production

Mass
Customisation

Volume
Service
Shop

Job shop

Low Variety High

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 Volume vs. Variety matrix
High

Continuous
Production

Mass
Customisation

Volume
Service
Shop

Job shop

Why don’t we produce anything Low Variety High

in this part of the matrix?

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Variation
• This refers to how much customer demand for products or services
fluctuates over time.
• High variation - Seasonal businesses like ski resorts.
• High variation requires adaptable capacity management
• Low variation - Utilities like electricity providers.
• Low variation can have more predictable and steady operations.

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Visibility
• Visibility is the extent to which customers see and are involved in the
production process.
• High visibility – Most of the in-person services.
• High visibility operations need to focus on customer experience.
• Low visibility - Behind-the-scenes data-center operations.
• Low visibility operations can concentrate on efficiency and technical excellence.

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Overview of 4V framework

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Questions to think about
• Product-service continuum.
• Think of the products/services you use and where they stand on the
continuum.
• Operations function in different settings.
• What does it mean to be an operations manager for different places you visit
every day?
• Input-Transformation-Output.
• What are the different inputs used in the outputs you use?
• How inputs are transformed into outputs? Think about the transformation.
• The 4V framework.
• Where do the brands/organisations you like lie on the 4V? And why?

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