OPERATIONS

MANAGEMENT

OPERATIONS
AND PRODUCTIVITY

Dr. Sameer Kulkarni©2023

 OUTLINE

 What is Operations Management?

 The heritage of Operations Management
 Why study OM?
 What Operations Managers do?

 Organizing to produce goods and services

 Where are the OM jobs?

 Exciting new trends in Operations Management

 Operations in the service sector

 The Productivity challenge

 LEARNING OBJECTIVES

When you complete this chapter, you should be able to:

 Identify or Define:
 Production and productivity
 Operations Management (OM)
 What operations managers do
 Services

 Describe or Explain:
 A brief history of operations management
 The future of the discipline
 Measuring productivity
 WHAT IS OPERATIONS
MANAGEMENT?
 Operations Management is the set of activities that
creates goods and services by transforming inputs into
outputs
 Operations Management focuses on carefully
managing the processes to produce and distribute products
and services.

AND PRODUCTION
 Production is the creation of goods and services
 SIGNIFICANT EVENTS IN
OPERATIONS MANAGEMENT

 Division of labor (Smith, 1776)

 Standardized parts (Whitney, 1800)
 Scientific management (Taylor, 1881)
 Coordinated assembly line (Ford 1913)
 Gantt charts (Gantt, 1916)
 Motion study (Gilbreths, 1922)
 Quality control (Shewhart, 1924)
SCIENTISTS

Adam Smith

He suggested that the huge

increases in productivity
obtainable from technology
or technological progress are
possible because human and
physical capital are matched,
usually in an organization.
Eli Whitney
Whitney's defenders have
claimed that he invented the
American system of
manufacturing-- the
combination of power
machinery, interchangeable
parts, and division of labor
that would underlie the
nation's subsequent industrial
revolution.
Frederick Winslow Taylor

He developed the theory of

management that analyzes
and synthesizes processes,
improving labor productivity.
Henry Ford
He said that an assembly line
is a manufacturing process in
which interchangeable parts
are added to a product in a
sequential manner using
optimally planned logistics to
create a finished product
much faster than with
handcrafting-type methods.
Henry Gantt

A Gantt chart is a popular

type of bar chart that
illustrates a project
schedule. Gantt charts
illustrate the start and finish
dates of the terminal
elements and summary
elements of a project.
The Gilbreths

The Gilbreths' motion

studies were more
focused on how a task
was done, and how best
to eliminate unneeded,
fatiguing steps in any
process.
Walter Shewhart
Shewhart framed the problem in
terms of assignable-cause and
chance-cause variation and
introduced the control chart as a tool
for distinguishing between the two.
Shewhart stressed that bringing a
production process into a state of
statistical control, where there is only
chance-cause variation, and keeping
it in control, is necessary to predict
future output and to manage a
process economically.
 SIGNIFICANT EVENTS

 CPM/PERT (Dupont, 1957)

 MRP (Orlicky, 1960)
 CAD
 Flexible Manufacturing Systems (FMS)
 Manufacturing Automation Protocol (MAP)
 Computer Integrated Manufacturing (CIM)
 WHY STUDY OM?

 OM is one of three major functions (marketing,

finance, and operations) of an organization
 We want/need to know how goods and services
are produced
 We want to know what operations managers do
 OM is such a costly part of an organization
 WHY STUDY OM?
 Related activities:
 managing purchases
 inventory control
 quality control
 storage
 logistics
 evaluations

and we need to comunicate them with each others.

 WHY STUDY OM?

 OM often includes substantial measurement

and analysis of internal processes, because a
great deal of focus is on efficiency and
effectiveness of processes.

 Ultimately, the nature of how operations

management is carried out in an organization
depends very much on the nature of products or
services in the organization.
 WHAT OPERATIONS MANAGERS
DO (by Henri Fayol):

 Plan
 Organize

 Staff

 Lead

 Control
 PLANNING
The process of deciding what to do. Effective planning seeks to
answer questions such as:

 What should the firm do? The output of this process are goals and objectives.
 When must the firm achieve these goals? The output is a schedule defining
milestones and due dates.
 Who is responsible for doing it? The outputs are assigned responsibilities.
 How should this be done? The outputs may be directions or plans of action.
 How should performance be measured? The output includes standards of
performance.

Planning is forward looking. When planning is

operational, the planning horizon is shorter and the level of
detail within is greater. When strategic, the planning horizon is
long and done in less detail.
 ANALYSING

The process of making sense of data that is often:

poorly structured, incomplete, inconsistent, inaccurate,
and/or available in overwhelming quantities.

Analysis supports the planning process by

providing the “facts” in useful formats that can then be
used to evaluate business alternatives.

Analyzing also supports management’s control

activity by providing the basis for corrective actions.
 ORGANIZING

The process of building organization structures and

interrelated task coordination teams. In the past,
organizing dealt mostly with humans, but increasingly
it involves data-getting:

 the right person

 the right information
 in the right form
 at the right time

those factors are the key success in organization

design.
 DIRECTING/IMPLEMENTING

 An action-oriented process that carries out

the outputs of the first three management
activities.
 This is where money is made and lost (!).
 In this process, management expends
resources to perform the tasks defined by
the planning process.
 CONTROLLING

The process of measuring the results of the other four

management activities.

 Were the plans any good?

 Did the analysis provide meaningful information to the
other processes?
 How well did we organize our resources to get the job
done?
 How well did we do it?

We might even add, how well did we measure the

performance of our control function?
 10 CRITICAL DECISIONS

 Service, product design

 Quality management
 Process, capacity design
 Location
 Layout design
 Human resources, job design.
 Supply-chain management
 Inventory management
 Scheduling
 Maintenance
 SECTION OF OM

 Procurement (Purchasing) Practices

• reviews guidelines for buying various materials from
suppliers and vendors - materials, including computers,
services from lawyers, insurance, etc.

 Management Control and Coordinating Function

• includes a broad range of activities to ensure that
organizational goals are consistently being met in an
effective and efficient fashion
 SECTION OF OM
 Product and Service Management
• the major activities involved in product and service
management are similar to those in operations
management. However, operations management is
focused on the operations of the entire organization,
rather than managing a product or service.

 Quality Management
• is crucial to effective operations management,
particularly continuous improvement. More recent
advancements in quality, such as benchmarking and
Total Quality Management, have resulted in
advancements to operations management as well.
 SECTION OF OM

 Inventory Management
• Costs can be substantial to store and move
inventory. Innovative methods, such as Just-in-Time
inventory control, can save costs and move products
and services to customers more quickly.

 Logistics and Transportation Management

• is focused on the flow of materials and goods from
suppliers, through the organization and to the
customers, with priority on efficiency and cost
effectiveness.
 SECTION OF OM

 Facilities Management
• depnds a great deal on effective management of facilities,
such as buildings, computer systems, signage, lighting, etc.

 Configuration Management
• It's important to track the various versions of products and
services. Consider the various versions of software that
continually are produced, each with its own version number.
Tracking these versions is configuration management.

 Distribution Channels
• The means of distribution depends very much on the nature
of the product or service.
 ORGANISATIONAL FUNCTIONS

 Marketing
 Gets customers
 Operations
 creates product or service
 Finance/Accounting
 Obtains funds
 Tracks money
 WHERE ARE THE OM JOBS?

 Technology/methods
 Facilities/space utilization
 Strategic issues
 Response time
 People/team development
 Customer service
 Quality
 Cost reduction
 Inventory reduction
 Productivity improvement
 NEW CHALLENGES IN OM
FROM TO
 Local or national  Global focus
focus  Just-in-time
 Batch shipments  Supply chain
 Low bid purchasing partnering
 Rapid product
 Lengthy product development,
development alliances
 Mass customization
 Standard products  Empowered
 Job specialization employees, teams
 CHARACTERISTICS OF
GOODS

 Tangible product
 Consistent product definition

 Production usually separate from

consumption
 Can be inventoried

 Low customer interaction

 CHARACTERISTICS OF
SERVICES

 Intangible product
 Produced & consumed at same time

 Often unique

 High customer interaction

 Inconsistent product definition

 Often knowledge-based

 Frequently dispersed
 GOODS VS. SERVICES

GOODS SERVICES

 Can be resold  Reselling unusual

 Can be inventoried  Difficult to inventory
 Quality difficult to
 Some aspects of measure
quality measurable  Selling is part f
 Selling is distinct from serviceo
production
 GOODS VS. SERVICES (2)

GOODS SERVICES
 Product is transportable  Provider, not product is
 Site of facility important transportable
for cost  Site of facility important
for customer contact
 Often easy to automate  Often difficult to
 Revenue generated automate
primarily from tangible  Revenue generated
product
primarily from
intangible service.
 THE ECONOMIC SYSTEM
TRANSFORMS INPUTS TO OUTPUTS

Inputs Process Outputs

Land, Labor, The economic system Goods and

Capital, transforms inputs to outputs Services
Management

Feedback loop
 PRODUCTIVITY
 Measure of process improvement
 Represents output relative to input

Productivity Units produced

= Input used

 Productivity increases improve standard of

living
 MEASUREMENT PROBLEMS

 Quality may change while the quantity of

inputs and outputs remains constant
 External elements may cause an increase

or decrease in productivity
 Precise units of measure may be lacking
 PRODUCTIVITY VARIABLES

 Labor - contributes about 10% of the

annual increase
 Capital - contributes about 32% of the

annual increase
 Management - contributes about 52% of

the annual increase

 SERVICE PRODUCTIVITY

 Typically, labor intensive

 Frequently individually processed

 Often an intellectual task performed by

professionals
 Often difficult to mechanize

 Often difficult to evaluate for quality