PRODUCTION

AND SERVICE
OPERATION
MANAGEMENT
Group 8
 WHAT IS OPERATIONS
MANAGEMENT?
Operations management involves
planning, organizing, and supervising
processes, and make necessary
improvements for higher profitability. The
adjustments in the everyday operations
have to support the company’s strategic
goals, so they are preceded by deep
analysis and measurement of the current
processes.
Required skills
The skills required to perform such work are as diverse as the
function itself. The most important skills are:
 Organizational abilities. Organizing processes in an
organization requires a set of skills from planning and
prioritizing through execution to monitoring. These abilities
together help the manager achieve productivity and
efficiency.
 Analytic capabilities/understanding of process. The
capability to understand processes in your area often
includes a broad understanding of other functions, too. An
attention to detail is often helpful to go deeper in the analysis.
 Coordination of processes. Once processes are analyzed
and understood, they can be optimized for maximum
efficiency. Quick decision-making is a real advantage here,
as well as a clear focus problem-solving.
 People skills. Flaws in the interactions with employees or member
of senior management can seriously harm productivity, so an
operation manager has to have people skills to properly navigate the
fine lines with their colleagues. Furthermore, clear communication of
the tasks and goals serves as great motivation and to give a
purpose for everyone.
 Creativity. Again, problem-solving skills are essential for a creative
approach if things don’t go in the right direction. When they do,
creativity helps find new ways to improve corporate performance.
 Tech-savviness. In order to understand and design processes in a
time when operations are getting increasingly technology-
dependent, affinity for technology is a skill that can’t be
underestimated. Operations managers have to be familiar with the
most common technologies used in their industries, and have an
even deeper understanding of the specific operation technology at
their organizations.
The Basic Principles of Production Managem
ent

Production management involves the planning, organisation,

direction and execution of production activities. The ultimate goal
of any production management solution is to convert a collection
of raw materials into a finished product. Some people refer to
production management as the bringing together of the 6 'Ms':
 Men
 Money
 Machines
 Materials
 Methods
 Markets
 7 Primary Principles of Production
Management
(used by Toyota company)
 Shorter set-up times.
By their nature, all set-up processes result in waste; they tie up labor
and equipment without adding value. Training, improved efficiency and giving
workers accountability for their own set-ups allowed Toyota to slash their set-
up times.
 Small-scale production.
Cutting the cost and time spent on set-ups allows a company to
produce goods in smaller batches and according to demand. This results in
lower set-up, capital and energy costs.
 Empowering employees.
Dividing a workforce into small teams and giving them accountability for
housekeeping and various other tasks has been shown to improve efficiency.
Teams are assigned leaders, and the workers within those teams are trained
on maintenance issues - allowing them to deal with delays in the production
process immediately.
 Equipment Maintenance.
Workers on the line are best placed to deal with mechanical breakdowns
and subsequent repairs. They can react to issues quickly and often without
supervision, which allows the production process to restart far more quickly
after a shut-down.
 Pull Production.
In a bid to minimize inventory holding costs and production lead times,
Toyota pioneered a system whereby the quantity of materials, labor and energy
expended at every stage of the process was solely reliant on the demand for
products from the next stage of production. Often referred to as Just in
Time (JIT), this principle was aimed at producing goods according solely to the
demand for them at any given time, thus eliminating unnecessary costs.
 Supplier Involvement.
Toyota demonstrated that treating component and raw material suppliers
as integral components of their own production process led to a number of
benefits. Suppliers were given training in Toyota processes, machinery,
inventory systems and set-up procedures. As a result, their suppliers were able
to react positively and swiftly when problems occurred.
 THE MAJOR PRINCIPLES OF
OPERATIONS MANAGEMENT
Some of the fundamentals of the everyday
work in operations management worth expanding
a little more. Below you will find two major
approaches that are important to understand the
driving forces behind the decisions about
planning, designing and organizing processes.
They are both embracing the idea of
focusing on the delivery: supporting the
organization to deliver better results, by an
optimized input of materials, equipment,
technology, and human resources.
 The ten principles of OM by Randall
Schaeffer
 Randall Schaeffer is an experienced
manufacturing and operations management
professional, an industrial philosopher, and
regular speaker at conferences organized by
APICS, the leading US association of
supply chain and operations management. He
presented his list of 10 principles of operations
management at an APICS conference in 2007,
saying the violation of these principles had
caused the struggle US manufacturing
companies were experiencing.
 Change.
 Success
 Humility
 Managed
 Passion
 Causality
 Variance
 Accountability
 Fundamentals
 Organization
 Reality
16 principles of Dr. R.J. Schonberger
Dr. Richard J. Schonberger, renowned
researcher of American manufacturing and
author of the book “World Class
Manufacturing: The Next Decade,” has
become widely known in operations
management by his set of 16 customer-
focused principles
 Team up with customers
 Continual, rapid improvement
 Unified purpose
 Know the competition
 Focus
 Organize resource
 Invest in HR
 Maintain equipment
 Simple “best” equipment
 Minimize human error
 Cut times
 Cut setup
 Pull system
 Total quality control
 Fix causes
 Visibility management
 THE ACTIVITIES OF OPERATIONS
MANAGEMENT
 There are three major groups of
activities performed by operations
management, deriving from its planning
or designing, organizing, and
supervising functions. All activities
involve considering assets, costs, and
human resources, and are preceded by
a thorough analysis of processes.
 Design
 Before planning processes or designing
products, operations management should be
busy analyzing the market to test the demands. If
it delivers promising results, e.g. a niche to target
or a new product or service to develop, you can
start planning.
 In most cases, planning involves designing a
new product, from the initial concept to
the actual launch, with several testing phases
involved. During planning, you will have to
consider both technical and business
requirements
Management/Organization
 This is a solid starting base for maximizing the efficiency
of your operations. Still, you will need constant and
competent management to correct the accidental
mistakes in planning, to adjust production to changing
costs or regulations, and keep them efficient on many
levels.
 The operations manager selects and schedules the
processes for an optimal result and does the same with
materials for an ideal quality and capacity. Organizing the
maintenance of the equipment is also part of the quality
management activities. Furthermore, the inventory and
the whole supply chain has to be managed in order to
produce more efficiently.
 Improve
 A great deal of operations management’s tasks, therefore,
comes from these needs, and this is where long-term
planning steps in. But remember, changes made
according to these plans are only as good as the
improvement they bring in business terms.
 A better way to forecast demand gets you closer to an
improvement of processes, as savings on costs and
delivery times occur. The quality of a product will be higher
if you have Total Quality Control established and assess
the operational risks correctly. Inventory control accounts
for a better use of supplies. With Just-In-Time
manufacturing, the capacity issues can be solved.
Collaboration is a common go-to strategy that you can use
to improve the effectiveness of your human resources.
Types of transformation process
Manufacturing processes

 Job shop – based on sales orders for a variety of small lots.

 Batch flow – generally owned designed products are
manufactured.
 Work-paced line flow – production layout arranged in a
sequence.
 Machine-paced line flow – produces mostly standard
products with machines playing a significant role.
 Batch/continuous flow hybrid – combination of the batch
and continuous flow.
 Continuous flow – rapid rate at which item move through
the system.
Service processes

 Service factory – offers limited mix of services

 Service shop – provides a diverse mix of
service.
 Mass service – provides services to a large
number of people simultaneously.
 Professional service – offers a diverse mix of
services. There is a lower utilization of capital
equipment compared to the service factory and
the service shop.
 IMPORTANT PARTS OF
PRODUCTIVE SYSTEMS
 Production Design
Product design refers to “the process of creating a set
of product specifications appropriate to the demands of
the situation.”
 Production Planning and Scheduling

Production planning may be defined as “forecasting the

future sales of a given product, translating this forecast
into the demand it generates for various production
facilities, and arranging for the procurement of these
facilities.” Scheduling is the “phase of production control
involved in developing timetables that specify how long
each operation in the production process takes.”
 Purchasing and Materials Management
The management of purchasing and materials must be
undertaken with a high degree of efficiency and effectiveness
especially in firms engaged in high volume production. Materials
management refers to “the approach that seeks efficiency of operation
through the integration of all the material acquisition, movement, and
storage activities in the firm.”
 Inventory Control

Inventory control is the process of establishing and maintaining

appropriate levels of reserve stocks of goods.
 Work-Flow Layout

Work-flow layout is the process of determining the physical

arrangement of the production system.
 Quality Control

Quality control refers to the measurement of products or services

against standards set by the company.
 Service Operations vs. Manufacturing
Operations
 Service and manufacturing operations have
differences, but also similarities. For example,
both create mission statements and a vision for
how the organization will be run and perceived
by customers. Each provider or manufacturer
wants to lead the market in its specific industry.
However, manufacturing and service operations
answer different questions and formulate
different strategies when it comes to planning
and managing the way in which an organization
is run.
 Characteristics
 Manufacturing operations produce tangible goods,
which are physical products that can be held and
seen. Manufacturing can be broken down into two
branches: process and discrete manufacturing. While
process manufacturers produce goods that typically
use a formula and ingredients, such as soda pop or
pharmaceutical drugs, discrete manufacturers
produce goods from parts, such as electronics,
appliances and automobiles. On the other hand,
service operations provide certain intangible services
that may not be easily identifiable. Service operations
can be classified into many industries, such as
banking, hospitality, advertising and consultancy.
 Customization vs. Standardization
 In general, manufacturers have a standardized way
of producing goods. Goods are produced en
masse in a factory or warehouse-type environment.
One finished product is generally the same as the
next. Service operations, by contrast, have more
opportunities to customize the services they
provide. For example, beauticians and hairdressers
must customize the styling and treatments to
match the customer's hair, shape of face and other
characteristics. Even in service operations where
you receive a tangible product, the service you
receive from workers may not always be the same.
 Production Environment
 Manufacturing and service operations both plan the
environment in which work takes place, but they focus on
different elements. Manufacturing operations, for instance,
consider the manufacturing layout. For example, the
manufacturing layout can be fixed, process-focused or
product-focused, such as in an assembly line factory. These
issues affect the manufacturer's workforce performance
and total output. Service operations, by contrast, plan the
environment according to how it affects customers. For
example, service operations are concerned with how the
atmosphere appears to customers. Dimensions of the
service environment include the layout of furnishings,
arrangement of signs and tangible cues, such as colors and
sounds designed to enhance the customer experience.
Operations Management
 In a manufacturing environment, operations managers
oversee the activities required to produce goods from
raw materials. Issues managers in this environment
face include managing the space to store raw
materials, the flow of materials through the
manufacturing process, how much product to produce
and quality of output. In a service operation,
operations managers schedule workers to handle
customer demand. They must coach and train
employees to provide optimal services to customers.
Service operations that also sell physical goods also
face inventory control issues, such as how much to
stock and when to order.
 Similar Issues
 Service and manufacturing organizations face many
similar issues that affect the end result of the
operation. For example, both face issues of cost
control. Manufacturing operations must find
suppliers of raw materials at the lowest cost -- and
highest quality -- possible. Likewise, service
operations' indirect cost of providing services must
be kept low so that the organization can provide
competitive prices to customers and still turn a
profit. Other issues both types of operations face
include forecasting demand for products and
services and staying competitive in the marketplace.
The Role of an Operations Manager
 An operations manager fills a pivotal role
in a business, government or other
organization. The precise tasks of an
operations manager depend in large part
upon the nature and size of the enterprise,
but she needs a wide range of business
and interpersonal skills to succeed. In
general, an operations manager plans,
oversees and smooth communication.
.
 Management of Resources
Operations managers play a leading role in managing both raw
materials and personnel. Oversight of inventory, purchasing and
supplies is central to the job. Human resources tasks include
determining needs, hiring employees, overseeing assignment of
employees and planning staff development.
 Financial Management

Operations managers play a key role in budgeting, controlling

costs and keeping the organization on track financially. Their
management of the supply chain and other resources helps
minimize costs of production. They study business forecasts,
sales reports and financial statements to find ways to maximize
results. They use methods such as cost-benefit analysis to
improve efficiency. Modern operations management even
includes sustainability in the financial equation.
 Goal-setting
Operations managers set goals and objectives and establish
policies for various departments in the organization. For
example, operations manager duties include sales forecasting
and planning of sales promotions. In cooperation with other
managers, they help establish procedures and put them into
effect.
 Communications

Operations managers need good communication and

interpersonal skills to help the different parts of an organization
work together. Their job includes creating a positive culture
where the work can get done. They facilitate communication
between employees and departments. At times, operation
managers help resolve disputes or disagreements. Operations
managers cooperate in high-level decision making with other
top executives of an organization, such as the president, chief
financial officer and chief executive