INTRODUCTION TO

OPERATIONS MANAGEMENT
CHAPTER - 1 1
 WHAT IS A PRODUCT

• Goods
• Physical items produced by business organizations.

• Services
• Activities that provide some combination of time, locations, form, and
psychological value.

• Product
• Not a single set of tangible features, but bundle of benefits that satisfy the
needs

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 PROCESS VS. SYSTEM

• Process
• A series of actions or steps taken in order to achieve a particular end.

• System
• A set of principles or procedures according to which something is done; an
organized scheme or method.

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BASIC FUNCTIONS OF A BUSINESS

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WHAT IS OPERATION

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WHAT IS OPERATION

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WHAT IS OPERATION

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WHAT IS OPERATION

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WHAT IS OPERATIONS MANAGEMENT

• Operations Management (OM)

• The management of systems or processes that create goods and/or provide

services.

• Refers to the administration of business practices to create the highest level

of efficiency possible within an organization.

• Is concerned with converting materials and labor into goods and services as
efficiently as possible to maximize the profit of an organization.

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WHAT IS SUPPLY CHAIN

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WHAT IS SUPPLY CHAIN

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 WHAT IS SUPPLY CHAIN

• Supply Chain
• A sequence of activities and organizations involved in producing and
delivering a good or service.

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

• It can be both positive & negative

• Avoid non-value adding activity always

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PRODUCTION OF GOODS VERSUS
PROVIDING SERVICES
• Degree of customer contact

• Labor content of jobs

• Wages

• Uniformity of inputs

• Measurement of productivity

• Quality assurance

• Inventory

• Ability to patent

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 OPERATIONS STORY

• Every aspect of business affects or is affected by operations.

• Finance <-> Operations <-> Marketing

• Budgeting, Economic Analysis of investment proposals, Provision of funds (done by Finance &
Operations together)

• Marketing communicates customers/feedback

• Lead Time: The time between ordering a good or service and receiving it.

• Other Functional Areas

• HR, Accounting, IT, PR, and so on.

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 PROCESS MANAGEMENT

• Process –
• one or more actions that transform inputs into outputs

• Managing process is the central of OM.

• Process Management Types

• Upper-management Processes: Organizational Governance
• Operational Processes: Purchasing
• Supporting Processes: Accounting

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 PROCESS MANAGEMENT

• Process Variation

• Process Variation: 4 Types (page 13)

• i) The variety of goods or services being offered
• Ii) Structural variation in demand
• Iii) Random variation
• Iv) Assignable variation

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 THE SCOPE OF OPERATIONS
MANAGEMENT
• Pictures in the Book

• It is- Across Organization

• Forecasting
• Capacity Planning
• Locating Facilities
• Facilities and Layout
• Scheduling
• Managing Inventories
• Assuring Quality
• Motivating and Training Employees

• Read the Book (1 title)

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THE SCOPE OF OPERATIONS
MANAGEMENT

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 THE SCOPE OF OPERATIONS
MANAGEMENT
• Managing the Supply Chain to Achieve Schedule, Cost, and
Quality Goals

• The Operations Manager is the ultimate responsible person for

the creation of goods/services

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 OPERATIONS MANAGEMENT AND
DECISION MAKING
• Model
• An abstraction of reality; a simplified representation of something.

• Physical models- look like abstract

• Schematic models- more abstract
• Mathematical models- the most abstract

• Quantitative Approaches
• Performance Metrics
• Analysis of Trade-Offs

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 OPERATIONS MANAGEMENT AND
DECISION MAKING

• Degree of Customization

• A System Approach

• Establishing Priorities
• Pareto Phenomenon- read from book

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 THE HISTORICAL EVOLUTION OF
OPERATIONS MANAGEMENT
• Craft Production
• System in which highly skilled workers use simple, flexible tools to produce
small quantities of customized goods.
• What is good/bad about it?

• Mass Production

• Interchangeable Parts

• Division of Labor

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 OPERATIONS TODAY

• E-business
• Use of internet to transact business

• E-commerce
• Consumer-to-business transactions.

• Technology
• The application of scientific discoveries to the development and improvement of goods
& services

 Product and Service Technology

 Process Technology
 Information Technology

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 OPERATIONS TODAY

• Six Sigma: A process of reducing costs, improving quality, and increasing

customer satisfaction

• Agility: The ability of an organization to respond quickly.

• Lean System: System that uses minimal amounts of resources to produce a

high volume of high quality goods with some variety.

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 REVIEW QUESTIONS

Define
• Operations Management, Supply Chain, Supply Chain Management, Value
Added, Lead Time, Six-Sigma, Agility, Lean System, Technology, Process,
and Process Management.

Differentiate
• Good vs. Service vs. Product
• Good Manufacturing vs. Service Providing
• Process vs. System
• E-commerce vs. E-business
• Mass Production vs. Craft Production

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 REVIEW QUESTIONS

1. What are the basic functions of business organizations?

2. Brief on types of technology.
3. Brief on “Division of Labor” and “Interchangeable Parts.”
4. Brief on Four types of Variation.
5. Briefly explain the Scopes of Operations Management.

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