Introduction

Operations
It is that part of a business organization that is responsible for producing goods and/ or
services.
Goods
Those are physical items that include raw materials, parts, subassemblies such a
motherboards that go int computers, and final products such as cell phones and
automobiles.
Services
These are activities that provide some combination of time, location, form, or
psychological value.
Operations management
The management of systems or processes that create goods and/or provide services.
Supply chain
A sequence of activities and organizations involved in producing and delivering a good or
service.
Business Function Areas
• Business organizations have three basic functional areas
 Finance
 Marketing
 Operations.
• It doesn’t matter whether the business is a retail store, a hospital, a manufacturing
firm, a car wash, or some other type of business; all business organizations have these
three basic functions.
• 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.
• Marketing is responsible for assessing consumer wants and needs and selling and
promoting the organization’s goods or services.
• Operations is responsible for producing the goods or providing the services offered
by the organization.
Supply Chain
• The sequence begins with basic suppliers of raw materials and extends all the way to
the final customer
• Facilities might include warehouses, factories, processing centers, offices, distribution
centers, and retail outlets.
• Functions and activities include forecasting, purchasing, inventory management,
information management, quality assurance, scheduling, production, distribution,
delivery, and customer service
• 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 services, and
passing the work on to the next step in the process.
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.
Operation
Function

• Value-added
• It is the term used to describe the difference between the cost of inputs and the value or price of
outputs.
• Firms use the money generated by value-added for research and development, investment in new
facilities and equipment, worker salaries, and profits.
• Consequently, the greater the value-added, the greater the amount of funds available for these
purposes.
• Value can also be psychological, as in branding.
Process Management
• A process consists of one or more actions that transform inputs into outputs. In essence, the central
role of all management is process management.
There are three categories of business processes
Upper-management processes (organizational governance and organizational strategy)
Operational processes. (purchasing, production and/or service, marketing, and sales)
Supporting processes. (accounting, human resources, and IT (information technology).
Process Variation
• The variety of goods or services being offered. The greater the variety of goods and services,
the greater the variation in production or service requirements.
• 2. Structural variation in demand. These variations, which include trends and seasonal variations
are generally predictable. They are particularly important for capacity planning.
• 3. Random variation. This natural variability is present to some extent in all processes as well as in
demand for services and products, and it cannot generally be influenced by managers.
• 4. Assignable variation. These variations are caused by defective inputs, incorrect work methods,
out-of-adjustment equipment, and so on. This type of variation can be reduced or eliminated by
analysis and corrective action.
Scope of Operation Management
• Forecasting such things as weather and landing conditions, seat demand for flights, and the
growth in air travel.
• Capacity planning, essential for the airline to maintain cash flow and make a reasonable profit.
(Too few or too many planes, or even the right number of planes but in the wrong places, will hurt
profits.)
• Facilities and layout, important in achieving effective use of workers and equipment.
• Scheduling of planes for flights and for routine maintenance; scheduling of pilots and flight
attendants; and scheduling of ground crews, counter staff, and baggage handlers.
• Managing inventories of such items as foods and beverages, first-aid equipment, inflight
magazines, pillows and blankets, and life preservers.
• Assuring quality, essential in flying and maintenance operations, where the emphasis is on
safety, and important in dealing with customers at ticket counters, check-in, telephone and
electronic reservations, and curb service, where the emphasis is on efficiency and courtesy.
• Motivating and training employees in all phases of operations.
• Locating facilities according to managers’ decisions on which cities to provide service for,
where to locate maintenance facilities, and where to locate major and minor hubs.
Historical evolution of Operation
Management
• The Industrial Revolution began in the 1770 in England and USA.
• Prior to that time, goods were 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; the machines in use today had not been
invented.
• Innovations in the 18th century changed the face of production forever by substituting
machine power for human power. The most significant of these was the steam engine,
because it provided a source of power to operate machines in factories.
• Craft production System in which highly skilled workers use simple, flexible tools to
produce small quantities of customized goods.
Drawbacks of Craft Production
Production was slow and costly, Production costs did not decrease as volume increased
A major change in the industrial revolution was The development of standard gauging
systems.
Historical evolution of Operation
Management
• Frederick Winslow Taylor (Father of scientific Management)
• Taylor believed in a “science of management” based on observation, measurement, analysis
and improvement of work methods, and economic incentives. He studied work methods in
great detail to identify the best method for doing each job. 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.
• 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.
• Henry Ford, the great industrialist, employed scientific management techniques in his
factories. Ford’s many contributions was the introduction of mass production to the
automotive industry, a system of production in which large volumes of standardized goods are
produced by low-skilled or semiskilled workers using highly specialized, and often costly,
equipment.
Historical evolution of Operation
Management
• Mass production
(System in which low-
skilled workers use
specialized machinery
to produce high
volumes of
standardized goods).
• Interchangeable
parts (Eli Whitney)
(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