OPERATIONS

MANAGEMENT

Dr. Weerawat Khawsuk

Rangsit University International College

IPO 201 03/02/2024

 What is operation management?

Why is operations management important in all

types of organizations?
KEY What is the input-transformation-output process?

QUESTIONS What is the process hierarchy?

How do operations (and processes) differ?

What do operations managers do?

 WHAT IS OPERATIONS MANAGEMENT?
It is about how organizations create and deliver services and products.
 The activity of managing the resources that create
and deliver services and products

All organizations have operations that produce

some mix of services and products

WHAT IS Every organization has an operations function

OPERATION because every organization creates some type of
service and product.
MANAGEMENT?
Operation managers are the people who have
particular responsibility for managing some of the
resources that comprise the operations function.
• In some organizations, the operation manager could be
called by some other name.
• Ex. Fleet manager, administrative manager, or store
manager.
 OPERATIONS FUNCTIONS IN
VARIOUS ORGANIZATIONS
• Internet Service Provider • Fast-food chain
• Maintain and update hardware • Locate potential sites for restaurants
• Update software and content • Provide processes and equipment to
• Respond to customer queries produce burger
• Implement new services • Maintain service quality
• Ensure security of customer data • Develop, install and maintain
equipment
• Reduce impact on local area
• Reduce packaging waste
 OPERATIONS FUNCTIONS IN
VARIOUS ORGANIZATIONS
• International aid charity • Furniture manufacturer
• Provide aid and development • Procure appropriate raw
projects for recipients materials and components
• Provide fast emergency response • Make sub-assemblies
when needed • Assemble finished products
• Procure and store emergency • Deliver products to customers
supplies • Reduce environmental impact of
• Be sensitive to local cultural products and processes
norms
 OPERATIONS IN PRACTICE
• Read textbook on page 5 – 6 :
LEGOLAND and LEGO both rely on their
operation managers

It illustrates how important the operations functions is for

any company whose reputation depends on creating high-
quality, sustainable and profitable products and services
 OPERATION IN THE
ORGANIZATION
• Three core functions of any organization
• Marketing function – responsible for positioning and
communicating the organization’s services and products to its
markets to generate customer demand
• Product/Service development function – responsible for developing
new and modified services and products to generate future customer
demand
• Operations function – responsible for the creation and delivery of
services and products based on customer demand
 OPERATION IN THE
ORGANIZATION
• There are the support functions that enable the core functions to operate
effectively
• Accounting, finance function
• Technical function
• Human resource function
• Information system function
• There is not always a clear division between functions
• Operations managers need to cooperate with other functions to ensure
effective organizational performance
 It is easy to visualize the operations function and what it does
even if we have never seen it.

Any business that creates something must use resources, so

OPERATIONS must have an operations activity.
MANAGEMENT
IMPORTANCE Operations management uses not just machines but also knowledge
and experience to efficiently (or effectively, creatively) assemble (or
produce, change, sell, move, cure, shape, etc.) products (or services,
ideas) that satisfy (or match, exceed, delight) customer (or client’,
citizens’, society’s) demands (or needs, concerns, dreams).
 OPERATIONS IN
PRACTICE
• Read on page 10 :
MSF operations provide medical
aid to people in danger
• Strategic objectives of not-for-profit
organizations may be more complex
and involve a greater emphasis on
political, economic, social, or
environmental objectives
• There may be a greater chance of
operations decisions being made
under conditions of conflicting
objectives
 NEW OPERATIONS AGENDA
• Changes in the business environment have significant impacts on the
challenges faced by operations managers
• New technologies – difficult to predict their effect
• Different supply arrangements – balanced against supply vulnerability
and ethical issues
• Increase emphasis on social and environmental issues – a greater
expectation about the ethical treatment of stakeholders (customers,
workforce, suppliers, society)
Some operations
responses in these three
areas
 INPUT-TRANSFORMATION-OUTPUT
PROCESS
• All operations create and deliver services and products by changing
input into output using a transformation process model
 INPUT-TRANSFORMATION-OUTPUT
PROCESS
• Operations take in a set of input resources to transform something into
output of services and products
• They differ in the nature of their specific inputs and outputs
• Hospital
• Deliver services that change the physiological or psychological condition of
patients
• Diagnostic, care, and therapeutic process
• Patients form part of the input and output
• Vehicle plant
• Create or deliver products
• Metal-forming machinery and assembly operations
 TRANSFORMED RESOURCES
Materials – to transform their physical properties (shape, composition),
to change their location (parcel delivery), to change the procession of
materials, to store materials (warehouse)

Information – to transform their informational properties (accountant), to

change the procession (market research), to store information (libraries,
cloud storage), to change location (telecoms companies)

Customers – to transform their physical properties (hairdressers,

surgeons), to accommodate customers (hotels), to change location or
conditions (airlines, hospitals),
 DOMINANT TRANSFORMED
RESOURCE INPUTS
Materials Information Customer
All manufacturing operations Accountants Hairdressers
Mining companies Bank headquarters Hotels
Retail operations Market research company Hospitals
Warehouses Financial analyst Mass rapid transports
Postal services News service Theaters
Container shipping lines University research unit Theme parks
Trucking companies Telecoms company Dentists
 TRANSFORMING RESOURCES

Resources that act upon the transformed resources. There are two types.

Facilities – buildings, equipment, plant, and process technology of the

operation

Staff – people who operate, maintain, plan, and manage the operation
 FRONT- AND BACK-OFFICE
TRANSFORMATION
• Front-office – interact with (transform) customers
• Back-office – have little or no direct contact with customers, but perform
the activities that support the front-office
OPERATIONS IN PRACTICE

• Read on page14 –
15 :

Marina Bay Sands

Hotel
 OUTPUTS
• Operation create products and services
• Products are physical things whereas services are activities or process
• Some services do not involve many physical products
• Some manufacturers do not give much service
• Most operations produce some mixture of products and services
 IHIP
CHARACTERISTICS

Heterogeneity – they
Intangibility – they are are difficult to
not physical items standardize
The difference between
product and service is not
always obvious
Inseparability – their Perishability – they
production and cannot be stored
consumption are because they have a
simultaneous very short shelf life
 IHIP CHARACTERISTICS

• Some operations
produce just
products
• Others produce just
services
 IHIP CHARACTERISTICS
• Intangibility – difficult to define boundary. Important to manage
customers’ expectations as to what the service comprises
• Heterogeneity – every service is different and difficult to standardize.
Cost efficiencies become difficult and staff must be trained to cope with
a wide variety of requests.
• Inseparability – production and consumption are simultaneous.
Operations must have sufficient capacity to meet demand.
• Perishability – output is difficult to store and ceases to have value after a
short time. Important to avoid lost revenue or underutilized resources.
 SERVITISATION
• Operations, which once considered themselves exclusively producers of
products, are becoming more service-conscious
• It involves firm developing the capabilities they need to provide services
and solutions that supplement their traditional product offerings
• Ex: Rolls-Royce
• rather than selling individual engines, offered customers to buy power-by-
the-hour
• Customers buy power the aero engine delivers, Roll-Royce provides
physical engines and all of support (maintenance, training, updates)
 OPERATIONS IN PRACTICE
• Read on page 18 :

Servitisation and
circular design at
Philips lighting
 SIPOC ANALYSIS
• It is a method of formalizing a process at a relatively general rather than a
detailed level
• It stands for Suppliers, Inputs, Process, Output, and Customers
• It helps all those involved in the process to understand what it involves
and where it fits within the business
• What information should suppliers to the process provide?
• What form should the information be given?
• What are the steps in the process and who is responsible for them?
 PROCESS HIERARCHY
• All operations consist of a collection of processes
interconnecting with each other to form an internal
network
• Each process acts as a smaller version of the whole
operation of which it forms a part
• The mechanisms that transform inputs into outputs are
these processes
• A process is an arrangement of resources and activities
that transform inputs into outputs that satisfy (internal
and external) customer needs
 PROCESS HIERARCHY
Operation Some of operation’s processes
Airline Passenger check-in assistance, baggage drop, security/seat check, board
passengers, fly passengers and freight around the world, flight scheduling, in-
flight passenger care, transfer assistance, baggage reclaim

Department store Source merchandise, manage inventory, display products, give sales advice,
sales, aftercare, complaint handling, delivery service

Police service Crime prevention, crime detection, information gathering/collating, victim

support, formally charging/detaining suspects, managing custody suites, liaising
with court/justice system

Ice cream Source raw materials, input quality checks, prepare ingredients, assemble
manufacturer products, pack products, fast freeze products, quality checks, finished good
inventory
 OPERATIONS MANAGEMENT
ANALYSIS
• Any business or operation can itself be viewed as part of a greater
network of business or operations
• It will have operations that supply it with the services and products it
needs
• It will supply customers who themselves may go on to supply their
customers
• This network of operations is called the supply network
• There are three levels: Process, Operation, and Supply Network
OPERATIONS MANAGEMENT
ANALYSIS
OPERATIONS MANAGEMENT
ANALYSIS
OPERATIONS MANAGEMENT
ANALYSIS
NON-OPERATIONS FUNCTIONS
 All operations processes are similar since they
all transform inputs

They differ in four important ways, known as

DIFFERENCE fours Vs
IN (Volume, Variety, Variation, Visibility)
OPERATIONS
Degree of
Variation in the visibility that
Volume of their Variety of their
demand for the creation of
output output
their output their output has
for customers
 VOLUME DIMENSION
• Ex: Volume has important implications for the way McDonald’s operations
are organized
• Repeatability of tasks people are doing and systemization of the work
• Standard procedures are specified for each job
• Low unit costs
• Ex: Small local cafeteria
• Volume and repetition are far lower
• Less investment in specialized equipment
• Cos is higher
 VARIETY DIMENSION
• Ex: Taxi company is high-variety service
• Pick up and drop off almost anywhere
• Drivers have good knowledge of the area
• Cost per km is high
• Ex: Bus service
• Has a few well-defined routes with a set schedule
• Little flexibility
• Standard and regular results in relatively low costs
 VARIATION DIMENSION
• Ex: Summer holiday resort hotels
• More customers stay in summer than winter
• Full capacity at the season high, but a small fraction during the off-season
• Variation in demand leads to change in capacity such as hiring extra staff for
summer
• Higher cost in recruitment, overtime, and underutilization of rooms
 VISIBILITY DIMENSION
• Visibility means
• How much of the operation’s activities its customers experience
• How much the operation is exposed to its customers
• Customer-processing operations are more exposed to their customers than
material- or information-processing operations
• Ex: Retail could operate as a high-visibility brick-and-mortar shop
• It is difficult for high-visibility operations to keep costs down
• Ex: Web-based retailer has far lower visibility
• Shorter time lags between orders placed, retrieved, and dispatched
• High staff utilization, centralized physical operation
 OPERATIONS IN
HotelF1
PRACTICE

• Read on pages 24 – 25
Two very different hospitality Ski Verbier
operations
 IMPLICATIONS OF FOUR VS OF
OPERATIONS PROCESSES
• High volume, low variety, low variation, and low customer contact result
in processing costs down
• Low volume, high variety, high variation, and high customer contact
carry processing costs penalty
• The position of an operation on four dimensions is determined by the
demands of the market it is serving
• Operations and processes can reduce their costs by increasing volume,
reducing variety, reducing variation and reducing visibility
WORKED EXAMPLE
 OPERATIONS MANAGEMENT
ACTIVITIES
• We classify operations management activities under four headings
• Directing the overall strategy of the operation
• Designing the operation’s services, products, and processes
• Planning and control process delivery
• Developing process performance
 OPERATIONS IN PRACTICE
• Read on page 27
Fjallraven products are
voted the most
sustainable in their
field