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Unit 1: Introduction To Operations Management

This unit introduces operations management and covers operations strategy in a global environment. By the end of the unit, students should be able to explain operations management, distinguish between goods and services, and calculate various measures of productivity. The unit defines operations management and its role in areas such as quality management, supply chain management, and inventory control. It also compares goods and services and discusses measuring and improving productivity. Finally, it examines how operations management strategy must align with and support a company's overall mission and business strategy.

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Kash
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69 views

Unit 1: Introduction To Operations Management

This unit introduces operations management and covers operations strategy in a global environment. By the end of the unit, students should be able to explain operations management, distinguish between goods and services, and calculate various measures of productivity. The unit defines operations management and its role in areas such as quality management, supply chain management, and inventory control. It also compares goods and services and discusses measuring and improving productivity. Finally, it examines how operations management strategy must align with and support a company's overall mission and business strategy.

Uploaded by

Kash
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Unit 1: Introduction to Operations

Management

This unit covers:

• Operations and Productivity (Chapter 1)


• Operations Strategy in a Global
Environment (Chapter 1)

By the end of this unit you should be able to:

• Explain the concept of Operations Management


• Explain the difference between a good and a service
• Calculate various measures of productivity

Respond to the discussion questions by Friday and respond to other participants


by Sunday. Answer unit assignment/ practice questions/ group assignment by
the following Thursday unless otherwise stated.

1. Operations Management

What is operations management?

• Production = Creation of goods and services


• Operations Management = Set of activities that create goods and services
by transforming inputs into outputs
• Manufacturing – Transformations is obvious whereas for services it is less
obvious

Historical Perspective

• Eli Whitney (1800) – Interchangeable, standard parts – govt contract for


10,000 muskets

1
• Frederick W Taylor (1881) – Father of scientific management – personnel
selection, planning and controlling, motion study and ergonomics
• Henry Ford and Charles Sorensen – Standardised parts/quasi assembly
lines
• Walter Shewart (1924) – Quality control, statistics, statistical sampling in
quality control

Operations Management Role?

• Management Process – Planning, Organising, Staffing, Leading,


Controlling
• Quality Management – Quality definition, responsibility for quality
• Service/Product Design – Product offerings, should products/services be
designed?
• Process and Capacity Design – Process order/necessary equipment
technology
• Location – Where to locate? How do evaluate the decision?
• Layout design – How should the facility be arranged? How large should
the facility be?

Operations Management Role?

• Human Resource and Job Design – Good work environment/ employee


expectations?
• Supply chain management – make or buy decisions, establishment of
critical few suppliers
• Inventory/MRP/JIT – How much inventory should we have? When should

• we order?
• Scheduling – Production subcontracting? Layoffs during production
downturns?
• Project Management – How do we plan to get things done

2
Common Functions in any company

• Operations – Creation of product/service


• Marketing – Generation of demand/receives the order
• Finance/accounting – collects the money/pays the bills

New trends in Operations Management

• Global focus – Decrease communication and transport costs


• JIT Performance – Cutting inventories, increase deliveries
• Supply-Chain partnering – Increased supplier involvement
• Rapid product development – Faster more effective design management
• Mass customization – Increased manufacturing/ Service flexibility
• Empowered Employees – More competent workforce

Operations in the Service Sector

• Inconsistent definition = Inconsistent Data


• Manufacturing companies become more service oriented
• Services = Food/Lodging, transport, insurance, real estate

Difference between goods and services

• Services = Intangible
• Services are produced and consumed simultaneously, no inventory
• Services often unique
• Services = High customer interaction
• Services = Knowledge based

Productivity

• Productivity – Ratio of output to inputs = Output/Inputs


• Operations Management Role – Increased Productivity
• Productivity Improvement

3
• Reduction in inputs
• Increase in outputs
• Increased productivity – Increased standard of living

Productivity Measurement

• Direct – labour hrs/ton or lbs of sugar/KWh

Productivity Measurement problems

• Quality changes despite variable consistency


• External factors
• Precise units of measure lacking
• Generally difficult to measure in the service sector

Productivity Variables

• Labour
• Capital
• Management

Productivity variables – Labour

• Key factors
• Basic education
• Labour force diet
• Social overhead
• Maintaining and enhancing labour skills

Productivity variables – Capital

• Capital investment provides tools for job completion


• Inflation and taxes increased capital costs

4
• Use of labour as opposed to capital is short term fix only

Productivity and the service sector

• Difficulties
• Labour intensive
• Individual processing
• Professional intellectual tasks
• Difficult to mechanise and automate
• Difficult to evaluate for quality

2. Operations Strategy in a Global Environment

Operations management and its business fit

• Mission – Operations management must have a clear mission

• Strategy – Must have a strategy to achieve the mission

Operations management mission

• Mission – Defines organization’s purpose


• Rationale for organisation’s existence
• Makes development of a good strategy easier
• Organisational mission supported by functional mission
• Differentiation/Cost leadership/Quick response

Operations Management Strategy

• Strategy should follow mission development


• Strategy – Organization’s action plan to achieve the mission
• Operations Managers translate strategic concepts into tangible tasks

5
• Aim is to create competitive advantage

Key Strategy elements in successful enterprise

• High product quality


• High capacity utilization
• High operating effectiveness
• Low investment intensity
• Low direct cost per unit

Preconditions for strategy implementation

• Competitor strength and weaknesses


• Environmental, technical and legal issues
• Product life cycle
• Resource available in firm
• Integration of OM strategy with company strategy

Strategy and the Product life cycle

• Product life cycle impact business/OM Strategy

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