Program: Master of Business

Administration (MBA)

Course Title: Operations Management

Course Code: MBA 622

Credit Hours: 3

Course Instructor: Gojjam Ademe (PhD)

04/19/2020 By Gojjam A. 1
Course outline: Course outline.docx
 Chapter One: Introduction to
Operations Management
Chapter contents:
1.1.Introduction
• Nature of OM
• Scope of OM
• OM and Decision Making
• Why study OM?
• Historical evolution of OM
1.2. Competitiveness, Strategy and Productivity
 Introduction

• What is OM?
• Why is it important? why study OM?
• What do operations management
professionals do?
• Do you feel that your work/job is
related to operations?
 What is OM?
• OM is the management of that part of
an organization that is responsible for
producing goods and/or services.
• It is the management of systems or
processes that create goods and/or
services.
Operations Management: Definition

Operations management is defined as

the design, operation, and
improvement of the systems that create
and deliver the firm’s primary products
and services.

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 Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
Why Study Operations Management?
• 50% or more of all jobs are in operations
management or related fields.
• Operations in business organizations function
as an engine of a car; in order for that car to
function properly, all of the parts must work
together.
• Similarly, all the parts of the business
organization must work together in order for
the organization to function successfully.
Why Study Operations Management?
• Working together successfully means that
everyone understand not only their own
role, they also understand the role of
others.
• This is WHY all business students are
required to take OM.
Why Study Operations Management?

Systematic Approach
to Org. Processes

Business Education/
Operations
Increase Competitive
Career Opportunities Management Advantage/Survival

Cross-Functional
Applications
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OM and Decision Making
• The chief role of an operations manager is
that of planner and decision maker.
• Most decisions involve many possible
alternatives that can have quite different
impacts on costs or profit.
• Consequently, it is important to make
informed decisions.
Operations Decision Making
• OM professionals make a number of key
decisions that affect the entire
organization such as:
• What: what resources will be needed, and
in what amount? how will resources be
allocated?
• When: when will each resource be
needed?
• Where: where the work be done?
Operations Decision Making
• How: how will the product/service be
designed? How will the work be done?
• Who: who will do the work?
N.B: You will have a range of alternatives in
each of the cases and OM provides you
tools necessary to handle those
decisions.
 Operations Decision Making
Marketplace

Corporate Strategy

Finance Strategy Operations Strategy Marketing Strategy

Operations Management

People Plants Parts Processes

Materials & Products &
Customers Services
Planning and Control

Input Output

The Transformation Process (value adding) 4

 Value-Added
• The difference between the cost of inputs
and the value or price of outputs

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
 Example 1: Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned vegetables
Metal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
 Example 2: Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy patients
Hospital Surgery
Medical SuppliesMonitoring
Equipment Medication
Laboratories Therapy

Discuss the University Process?

 Transformations
• Physical--manufacturing
• Locational--transportation
• Exchange--retailing
• Storage--warehousing
• Physiological--health care
• Informational--telecommunications

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Production of goods vs Delivery of services

• What is the difference between goods and

service?
• Production of goods results in a tangible output
(e.g. PC, Shoes, TV set)-anything that we can
see or touch.
• Production of service results in intangible
outputs ( medical treatment, TV repair)
Production of goods vs Delivery of services

• Manufacturing and service are often different

in terms of what is done but similar in terms
of how it is done.
• Manufacturing is goods-oriented where as
service is act-oriented.
 Manufacturing or Service?

Tangible Act

What more differences are there between

production of goods and production of
services?
The key difference may involve:
• Degree of customer contact
• Uniformity of inputs
• Labour contents of jobs
• Uniformity of output
• Measurement of productivity
• Production and delivery
• Quality assurance
• Amount of inventory
Manufacturing vs Service
Characteristic Manufacturing Service
Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
High
 What about McDonald’s?

• Service or Manufacturing?

• The company certainly manufactures tangible

products

• Why then would we consider McDonald’s a

service business?

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Front and Back Office

Back Office

Service Provider

Front Office

Customer

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Core “Factory Services”

Core Services are basic things that

customers want from products that they
purchase.
• Quality
• Flexibility
• Speed
• Price (or production cost)

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 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
• Problem Solving and Field Support
• Sales Support

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Scope of OM
• The scope of OM ranges across the
organization
• OM people are involved in the product and
service design, process selection, selection
and management of technology, design work
system, location planning, facility planning,
and quality improvement of the organization’s
product/service
Scope of OM
• The operations functions include many
interrelated activities, such as forecasting,
capacity planning, scheduling, managing
inventories, assuring quality, motivating
employees, deciding where to locate facilities
and so on
 Operations Management - Overview

Process Analysis Process Control Supply Chain Project

and Design and Improvement Management Management

Operations Quality Supply Chain

Strategy Management Strategy

Process Analysis Statistical Just in Time

Process Control
Job Design Planning for Production
Consulting and
Manufacturing Reengineering Capacity Management

Facility Layout Aggregate

Planning

Services Inventory Control

Waiting Line Analysis and Materials Requirement Planning

Simulation
 The Historical Evolution of OM

 Cottage System <1700 (small scale)TIME

 Industrial Revolution 1700 - 1800
 Civil War 1850s
 Scientific Management 1890s
 Moving Assembly Line 1910s
 Hawthorne Studies 1930s
 Operations Research 1940s
 Global Competition 1970s
 Service Revolution 1980s
 Mass Customization 1990s
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 Development of OM as a Field – The Names and Emphasis Change, but
the Elements Remain Basically the Same!

Scientific Manufacturing TQM &

Management Strategy Six Sigma

Moving Assembly JIT/Lean Business Process

Line Manufacturing Reengineering

Hawthorne Manufacturing Electronic

Studies Resources Planning Enterprise

Operations Service Quality Global Supply

Research and Productivity Chain Mgt.

Historical OM’s Emergence

Underpinnings as a Field
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 Thank you
Questions and Comments