BA 26 Operations Management (Total Quality

Management)
KRISMARY SHARMAINE D. YAPO
Instructor, Business Administration Department
College of Business, Economics and Accountancy
 Topics Covered:
A. What is operations management?
B. The Historical evolution of operations management
1. Industrial Revolution
2. Scientific Management
3. Human relations Movement
4. Decision Models and Management Science
5. The Influence of Japanese Manufacturers
C. Supply Chain Management
 Learning Outcomes
At the end of the unit, the students must have:
1. explained what is operation management as an
important function of business;
2. traced the evolution of operations management; and
3. discussed supply chain management.
 UNIT I. OVERVIEW OF
OPERATIONS MANAGEMENT
 What is operations management?

Operations is the part of a business organization

that is responsible for producing goods and/or
services.
 Whereas,

a product is a tangible offering to a customer and a a

service is an intangible offering. The former is
usually a one-time exchange for value. In contrast, a
service usually involves a longer period of time.
 Operations management focuses on carefully
managing the processes to produce and distribute
products and services.
The three basic functions of business
organizations:
1. FINANCE is responsible for securing financial
resources at favorable prices and allocating
those resources throughout the organization, as
well as budgeting, analyzing investment
proposals, and providing funds for operations.

2. MARKETING is responsible for assessing

consumer wants and needs, and selling and
promoting the organization’s goods or services.

3. OPERATIONS is responsible for producing the

goods or providing the services offered by the
organization.
The three basic functions of business
organizations:

OPERATIONS MANAGEMENT
is the management of systems or processes that create
goods and/or provide services.
 SUPPLY CHAIN

A supply chain is the sequence of organizations—

their facilities, functions, and activities—that are
involved in producing and delivering a product or
service.
 Figure 1.3 provides
another illustration of a supply
chain: a chain that begins with
wheat growing on a farm and
ends with a customer buying a
loaf of bread in a supermarket.
Note that the value of the product
increases as it moves through the
supply chain.
 Supply chains are both external and internal
to the organization.
The external parts of a supply chain provide raw materials, parts, equipment,
supplies, and/or other inputs to the organization, and they deliver outputs that are
goods to the organization’s customers.

The internal parts of a supply chain are part of the operations function itself,
supplying operations with parts and materials, performing work on products,
and/or performing services.
• Inputs
• Transformation Process
• Outputs
• Feedback
• Control
Examples of inputs,
transformation, and
outputs.
Illustrations of the transformation process

The essence of the operations function is to add value during the transformation
process. Value-added is the term used to describe the difference between the cost
of inputs and the value or price of outputs.
 PRODUCTION OF GOODS VERSUS
PROVIDING SERVICES
 Production of goods results in a tangible output, such as an
automobile, eyeglasses, a golf ball, a refrigerator—anything that we can
see or touch. It may take place in a factory, but it can occur elsewhere.
For example, farming and restaurants produce nonmanufactured goods.

• Delivery of service, on the other hand, generally implies an act. A

physician’s examination, TV and auto repair, lawn care, and the
projection of a film in a theater are examples of services.
 Manufacturing and service are often different in terms of what is
done but quite similar in terms of how it is done.
1. Degree of customer contact
2. Labor content of jobs
3. Uniformity of inputs
4. Measurement of productivity
5. Quality assurance
6. Inventory
7. Wages
8. Ability to patent
 PROCESS MANAGEMENT
A process consists of one or more actions that transform
inputs into outputs.
Three categories of business processes:
1. Upper-management processes. These govern the operation of the
entire organization.
2. Operational processes. These are the core processes that make up the
value stream.
3. Supporting processes. These support the core processes.
 THE SCOPE OF OPERATIONS
MANAGEMENT
The operations function includes many interrelated activities, such as
forecasting, capacity planning, scheduling, managing inventories, assuring
quality, motivating employees, deciding where to locate facilities, and more.
The activities include:
• Forecasting
• Capacity planning • Facilities and layout
• Locating facilities • Managing inventories
• Assuring quality,
• Motivating
OPERATIONS MANAGEMENT
AND DECISION MAKING
The chief role of an operations manager is that of planner/decision maker. Operations
management professionals make a number of key decisions that affect the entire organization.
These include the following:
What: What resources will be needed, and in what amounts?
When: When will each resource be needed? When should the work be scheduled? When
should materials and other supplies be ordered? When is corrective action needed?
Where: Where will the work be done?
How: How will the product or service be designed? How will the work be done
(organization, methods, equipment)? How will resources be allocated?
Who: Who will do the work?

•
 Approaches to Decision Making
MODEL- an abstraction of reality, a simplified representation of something.

QUANTITATIVE APPROACHES - Quantitative approaches to problem

solving often embody an attempt to obtain mathematically optimal solutions to
managerial problems.

PERFORMANCE METRICS - All managers use metrics to manage and

control operations. There are many metrics in use, including those related to profits,
costs, quality, productivity, flexibility, assets, inventories, schedules, and forecast
accuracy.
 Approaches to Decision Making
ANALYSIS OF TRADE-OFFS - Operations personnel frequently encounter decisions that
can be described as trade-off decisions. For example, in deciding on the amount of inventory to
stock, the decision maker must take into account the trade-off between the increased level of
customer service that the additional inventory would yield and the increased costs required to
stock that inventory.

DEGREE OF CUSTOMIZATION - A major influence on the entire organization is

the degree of customization of products or services being offered to its customers.
 Approaches to Decision Making
SYSTEMS APPROACH - A systems viewpoint is almost always beneficial in
decision making. Think of it as a “big picture” view. A system can be defined as a set
of interrelated parts that must work together.

ESTABLISHING PRIORITIES - a relatively few issues or items are very important,

so that dealing with those factors will generally have a disproportionately large impact
on the results achieved. This well-known effect is referred to as the Pareto
phenomenon - A few factors account for a high percentage of the occurrence of
some event(s).
•
THE HISTORICAL EVOLUTION
OF OPERATIONS
MANAGEMENT
The Industrial • Prior to that time, goods were
Revolution (1770s) produced in small shops by
craftsmen and their apprentices.

• Under that system, it was common

for one person to be responsible
for making a product, such as a
horse-drawn wagon or a piece of
furniture, from start to finish.

• Only simple tools were available;

CRAFT PRODUCTION: highly skilled workers using the machines in use today had not
simple, flexible tools produced goods according
to customer specifications.
been invented.
Scientific • The scientific management era brought
widespread changes to the management

Management •
of factories.

The movement was spearheaded by the

efficiency engineer and inventor
FREDERICK WINSLOW TAYLOR, who is
often referred to as the father of scientific
management.

• Taylor also believed that management

should be responsible for planning,
carefully selecting and training workers,
finding the best way to perform each job,
achieving cooperation between
management and workers, and
separating management activities from
work activities.
Scientific A number of other pioneers also contributed
heavily to this movement, including the
following:
Management  Frank Gilbreth was an industrial
engineer who is often referred to as the
father of motion study. He developed
principles of motion economy that could
be applied to incredibly small portions of a
task.

 Henry Gantt recognized the value of

nonmonetary rewards to motivate
workers, and developed a widely used
system for scheduling, called Gantt charts.
Scientific A number of other pioneers also contributed
heavily to this movement, including the
Management following:

 Harrington Emerson applied Taylor’s

ideas to organization structure and
encouraged the use of experts to improve
organizational efficiency. He testified in a
congressional hearing that railroads could
save a million dollars a day by applying
principles of scientific management.

 Henry Ford, the great industrialist,

employed scientific management
techniques in his factories.
 Among Ford’s many contributions was
the introduction of ..
• Mass production . System in which low-skilled workers use
specialized machinery to produce high volumes of standardized
goods.

• Interchangeable parts. Parts of a product made to such precision that

they do not have to be custom fitted.

• Division of labor. The breaking up of a production process into small

tasks, so that each worker performs a small portion of the overall job.
 Whereas the scientific management movement
Human Relations heavily emphasized the technical aspects of
work design, the human relations movement

Movement emphasized the importance of the human

element in job design.

• Lillian Gilbreth, a psychologist and the

wife of Frank Gilbreth, worked with her
husband, focusing on the human factor in
work. Many of her studies dealt with
worker fatigue.

• Elton Mayo revealed that in addition to

the physical and technical aspects of work,
worker motivation is critical for improving
productivity.
Human Relations • Abraham Maslow developed motivational
theories, which Frederick Hertzberg
refined.
Movement • Douglas McGregor added Theory X and
Theory Y. These theories represented the
two ends of the spectrum of how
employees view work.

• William Ouchi added Theory Z, which

combined the Japanese approach with
such features as lifetime employment,
employee problem solving, and consensus
building.
The Influencers of • F. W. Harris developed one of the
first models in 1915: a
Japanese mathematical model for inventory
order size.
Manufacturers
• In the 1930s, three coworkers at
Bell Telephone Labs, H. F. Dodge, H.
G. Romig, and W. Shewhart,
developed statistical procedures for
sampling and quality control.

• In 1935, L.H.C. Tippett conducted

studies that provided the
groundwork for statistical sampling
theory.
 SUPPLY CHAIN
MANAGEMENT
A supply chain is the sequence of organizations—their facilities,
functions, and activities—that are involved in producing and delivering a
product or service.
Supply chain management is the strategic coordination of business
functions within a business organization and throughout its supply chain
for the purpose of integrating supply and demand management.

Logistics is the part of a supply chain involved with the forward and reverse
flow of goods, services, cash, and information. Logistics management
includes management of inbound and outbound transportation, material
handling, warehousing, inventory, order fulfillment and distribution, third-
party logistics, and reverse logistics (the return of goods from customers).
The figure shows
a more detailed
version of the
farm-to-market
supply chain
with key
suppliers at each
stage included.
• Supply chains are sometimes referred to as value chains, a
term that reflects the concept that value is added as goods and
services progress through the chain.

• The supply or value chain has two components for each

organization: a supply component and a demand
component.
• The supply component starts at the beginning of the chain and
ends with the internal operations of the organization.

• The demand component of the chain starts at the point where

the organization’s output is delivered to its immediate customer
and ends with the final customer in the chain.

• The demand chain is the sales and distribution portion of the

value chain.
Supply chains are the lifeblood
of any business organization.
 The goal of supply chain management is to
match supply to demand as effectively and efficiently as
possible. Key aspects relate to:

1. Determining the appropriate level of outsourcing.

2. Managing procurement.
3. Managing suppliers.
4. Managing customer relationships.
5. Being able to quickly identify problems and respond to them.
 FLOW MANAGEMENT
The three types of flow :
1. Product and service flow involves the movement of goods or
services from suppliers to customers as well as handling customer
service needs and product returns.
2. Information flow involves sharing forecast and sales data,
transmitting orders, tracking shipments, and updating
order status.
3. Financial flow involves credit terms, payments, and consignment
and title ownership arrangements.
MANAGEMENT RESPONSIBILITIES
• Legal responsibilities
• Economic responsibilities
• Ethical responsibilities
 Strategic Responsibilities
1. Supply chain strategy alignment
2. Network configuration
3. Information technology
4. Products and services
5. Capacity planning
6. Strategic partnerships
7. Distribution strategy
8. Uncertainty and risk reduction
Key Tactical and
Operational
Responsibilities
“Supply chains are a vital part of every
business organization and need to be
managed effectively
to achieve a balance of supply and
demand.”
 References
Books:
• Saini, V. (2017) Concepts of Quality, Total Quality and Total Quality
Management.http://www.ddegjust.ac.in/2017/Uploads/11/POM-324.pdf
• Lindsay, W.M., Evans J.R (2014) Total Quality Management. Cengage
Learning

Online References:
• https://managementhelp.org/operationsmanagement/
• http://logistics.about.com/od/qualityinthesupplychain/a/TQM.htm
THANK YOU!