Operation and Production Management

Prepared by Muhammad Bilal Lecturer

IMStudies
What is OPM?

Operations and Production Management ("OPM") is

about the transformation of production and operational
inputs into "outputs" that, when distributed, meet the
needs of customers.
What is Operation Management?
Operations management is the activity of managing the
resources which produce and deliver products and
services.
The operations function is the part of the organization
that is responsible for this activity.
Every organization has an operations function because
every organization produces some type of products and/or
services. However, not all types of organization will
necessarily call the operations function by this name.
(Note that we also use the shorter terms ‘the operation’
and ‘operations’ interchangeably with the ‘operations
function’).
Production management:

An effective planning and control on production

parameters to achieve or create value for customers is
called production management.
Production Management v/s Operations
Management
 A high level comparison which distinct production and operations
management can be done on following characteristics:
 Output: Production management deals with manufacturing of
products like (computer, car, etc) while operations management
cover both products and services.
 Usage of Output: Products like computer/car are utilized over a
period of time whereas services need to be consumed immediately
 Classification of work: To produce products like computer/car
more of capital equipment and less labor are required while
services require more labor and lesser capital equipment.
 Customer Contact: There is no participation of customer during
production whereas for services a constant contact with customer is
required.
Operation manager
Operations managers are the people who have
particular responsibility for managing some, or all, of
the resources which compose the operations function.
Again, in some organizations the operations manager
could be called by some other name.
For example, he or she might be called the ‘fleet
manager’ in a distribution company, the
‘administrative manager’ in a hospital, or the ‘store
manager’ in a supermarket.
Operations in the organization
The operations function is central to the organization
because it produces the goods and services which are
its reason for existing, but it is not the only function. It
is, however, one of the three core functions of any
organization. These are:
1. the marketing (including sales) function – which is
responsible for communicating the organization’s
products and services to its markets in order to
generate customer requests for service;
2. the product/service development function – which
is responsible for creating new and modified products
and services in order to generate future customer
requests for service;
3. the operations function – which is responsible for
fulfilling customer requests for service through the
production and delivery of products and services.
Support functions
In addition, there are the support functions which
enable the core functions to operate effectively. These
include, for example:
● the accounting and finance function – which
provides the information to help economic decision-
making and manages the financial resources of the
organization;
● the human resources function – which recruits and
develops the organization’s staff as well as looking
after their welfare.
 Operations management is important in
all types of organization
Automobile assembly factory – Operations management
uses machines to efficiently assemble products that satisfy
current customer demands
Physician (general practitioner) – Operations
management uses knowledge to effectively diagnose
conditions in order to treat real and perceived patient
concerns
Management consultant – Operations management uses
people to effectively create the services that will address
current and potential client needs
Disaster relief charity – Operations management uses
our and our partners’ resources to speedily provide the
The input–transformation–output
process
Operations are processes that take in a set of input
resources which are used to transform something, or
are transformed themselves, into outputs of products
and services.
For example, if you stand far enough away from a
hospital or a car plant, they might look very similar,
but move closer and clear differences do start to
emerge. One is a manufacturing operation producing
‘products’, and the other is a service operation
producing ‘services’ that change the physiological or
psychological condition of patients.
Inputs to the process
One set of inputs to any operation’s processes are
transformed resources. These are the resources that are
treated, transformed or converted in the process. They are
usually a mixture of the following:
Materials – operations which process materials could do
so to transform their physical properties (shape or
composition, for example). Most manufacturing operations
are like this. Other operations process materials to change
their location (parcel delivery companies, for example).
Some, like retail operations, do so to change the possession
of the materials. Finally, some operations store materials,
such as in warehouses
Information – operations which process information
could do so to transform their informational properties
(that is the purpose or form of the information);
accountants do this. Some change the possession of the
information, for example market research companies
sell information. Some store the information, for
example archives and libraries. Finally, some
operations, such as telecommunication companies,
change the location of the information
Customers – operations which process customers might
change their physical properties in a similar way to
materials processors: for example, hairdressers or
cosmetic surgeons. Some store (or more politely
accommodate) customers: hotels, for example. Airlines,
mass rapid transport systems and bus companies
transform the location of their customers, while
hospitals transform their physiological state. Some are
concerned with transforming their psychological state,
for example most entertainment services such as music,
theatre, television, radio and theme parks.
Transforming resources
The other set of inputs to any operations process are
transforming resources. These are the resources which
act upon the transformed resources. There are two
types which form the ‘building blocks’ of all
operations:
facilities – the buildings, equipment, plant and process
technology of the operation;
staff – the people who operate, maintain, plan and
manage the operation. (Note that we use the term
‘staff’ to describe all the people in the operation, at any
level.)
Outputs from the process
 Although products and services are different, the distinction can
be subtle. Perhaps the most obvious difference is in their
respective tangibility.
 Products are usually tangible. You can physically touch a
television set or a newspaper.
 Services are usually intangible. (You cannot touch consultancy
advice or a haircut (although you can often see or feel the results
of these services). Also, services may have a shorter stored life.
Products can usually be stored, at least for a time. The life of a
service is often much shorter. For example, the service of
‘accommodation in a hotel room for tonight’ will perish if it is
not sold before tonight – accommodation in the same room
tomorrow is a different service.)
Most operations produce both products
and services
Some operations produce just products and others just
services, but most operations produce a mixture of the
two.
Pure product (Car manufacturer etc)
Pure service (Banks, restaurants etc)
Facilitating services (Technical advice, serving foods
in a hotel etc)
Facilitating products ( software service company
provide device to operate service)
 The activities of operations management
Understanding the operation’s strategic performance
objectives. The first responsibility of any operations
management team is to understand what it is trying to
achieve. This means understanding how to judge the
performance of the operation at different levels, from broad
and strategic to more operational performance objectives.
Developing an operations strategy for the organization.
Operations management involves hundreds of minute-by-
minute decisions, so it is vital that there is a set of general
principles which can guide decision-making towards the
organization’s longer-term goals
 Designing the operation’s products, services and processes.
Design is the activity of determining the physical form, shape
and composition of products, services and processes.
 Planning and controlling the operation. Planning and control
is the activity of deciding what the operations resources should
be doing, then making sure that they really are doing it.
 Improving the performance of the operation. The continuing
responsibility of all operations managers is to improve the
performance of their operation
 The social responsibilities of operations management. It is
increasingly recognized by many businesses that operations
managers have a set of broad societal responsibilities and
concerns beyond their direct activities. The general term for
these aspects of business responsibility is ‘corporate social
responsibility’ or CSR. It should be of particular interest to
operations managers, because their activities can have a direct
and significant effect on society.
 Effective operations management
Advantage to business
Operations management can reduce costs:
It can reduce the costs of producing products and
services, and being efficient.
 Operations management can increase revenue : It can
achieve customer satisfaction through good quality and
service.
Operations management can reduce risk : It can reduce
the risk of operational failure, because well designed and
well run operations should be less likely to fail, and if they
do they should be able to recover faster and with less
disruption (this is called resilience).
Operations management can reduce the need for
investment: It can reduce the amount of investment
(sometimes called capital employed) that is necessary to
produce the required type and quantity of products and
services by increasing the effective capacity of the
operation and by being innovative in how it uses its
physical resources.
 Operations management can enhance innovation : It
can provide the basis for future innovation by learning
from its experience of operating its processes, so
building a solid base of operations skills, knowledge and
capability within the business.
The five operations performance
objectives
The quality objective: By ‘doing things right’,
operations seek to influence the quality of the
company’s goods and services. Externally, quality is an
important aspect of customer satisfaction or
dissatisfaction. Internally, quality operations both
reduce costs and increase dependability.
The speed objective: By ‘doing things fast’,
operations seek to influence the speed with which
goods and services are delivered. Externally, speed is
an important aspect of customer service. Internally,
speed both reduces inventories by decreasing internal
throughput time and reduces risks by delaying the
commitment of resources.
The dependability objective: By ‘doing things on time’,
operations seek to influence the dependability of the
delivery of goods and services. Externally, dependability
is an important aspect of customer service. Internally,
dependability within operations increases operational
reliability, thus saving the time and money that would
otherwise be taken up in solving reliability problems and
also giving stability to the operation.
The flexibility objective: By ‘changing what they do’,
operations seek to influence the flexibility with which
the company produces goods and services. Externally,
flexibility can: – produce new products and services
(product/service flexibility); – produce a wide range or
mix of products and services (mix flexibility); – produce
different quantities or volumes of products and services
(volume flexibility); – produce products and services at
different times (delivery flexibility). Internally,
flexibility can help speed up response times, save time
wasted in changeovers, and maintain dependability
The cost objective: By ‘doing things cheaply’,
operations seek to influence the cost of the company’s
goods and services. Externally, low costs allow
organizations to reduce their price in order to gain
higher volumes or, alternatively, increase their
profitability on existing volume levels. Internally, cost
performance is helped by good performance in the
other performance objectives.
 What is strategy?
 Linguistically the word derives from the Greek word ‘strategos’
meaning ‘leading an army’.
 Both military and business strategy can be described in similar
ways, and include some of the following.
● Setting broad objectives that direct an enterprise towards its
overall goal.
● Planning the path (in general rather than specific terms) that
will achieve these goals.
● Stressing long-term rather than short-term objectives.
● Dealing with the total picture rather than stressing individual
activities.
● Being detached from, and above, the confusion and
distractions of day-to-day activities
Strategic decision
Strategic decisions’ are those decisions which are
widespread in their effect on the organization to which
the strategy refers, define the position of the
organization relative to its environment, and move the
organization closer to its long-term goals.
But ‘strategy’ is more than a single decision; it is the
total pattern of the decisions and actions that influence
the long-term direction of the business.
What is operations strategy?
 Operations strategy concerns the pattern of strategic decisions and
actions which set the role, objectives and activities of the operation.
 Most businesses expect their operations strategy to improve
operations performance over time.
 Operations strategy perform following roles:
a. Implementing business strategy: Most companies will have some
kind of strategy but it is the operation that puts it into practice.
b. Supporting business strategy: It means developing the
capabilities which allow the organization to improve and refine its
strategic goals.
c. Driving business strategy: The third, and most difficult, role of
operations is to drive strategy by giving it a unique and long-term
advantage.
Top-down strategies
The product/service life cycle influence on
performance objectives
Introduction stage: When a product or service is first
introduced, it is likely to be offering something new in terms
of its design or performance, with few competitors offering the
same product or service. The needs of customers are unlikely
to be well understood, so the operations management needs to
develop the flexibility to cope with any changes and be able to
give the quality to maintain product/service performance.

Growth stage.: As volume grows, competitors may enter the

growing market. Keeping up with demand could prove to be
the main operations preoccupation. Rapid and dependable
response to demand will help to keep demand buoyant (good),
while quality levels must ensure that the company keeps its
share of the market as competition starts to increase.
Maturity stage: Demand starts to level off. Some early
competitors may have left the market and the industry will
probably be dominated by a few larger companies. So
operations will be expected to get the costs down in order to
maintain profits or to allow price cutting, or both. Because of
this, cost and productivity issues, together with dependable
supply, are likely to be the operation’s main concerns.

Decline stage: After time, sales will decline with more

competitors dropping out of the market. There might be a
residual market, but unless a shortage of capacity develops the
market will continue to be dominated by price competition.
Operations objectives continue to be dominated by cost.
Thanks…