Operations Management

Dr. Mokhtar Kamel

Industrial Engineering
Suez Canal University
Agenda
1. Mc Donald’s Case Study
2. Operations Management Definition
• Operations within a production cycle of a model restaurant
3. Business Organizational Structure
• Business Organizational Structure (Service): Real Estate
4. Services VS Goods
5. History of Operations Management
6. Operations Management Scope:
• Elements of Supply Chain Management
• Famous cases in Supply Chain Management
• Supply Chain Management Decisions
Agenda
7. Operations Management and Supply chain Management
8. Environmental Aspects in Operations Management
9. Ethical Conduct in Operations Management
10. Why Study Operations Management?
• What Operations Managers Do?
• Market Place for Operations Management Students
11. Latest Trends in Operations Management
• Famous Scientific Journals of Operations Management
• Latest Trend of Research in Operations Management
• Glimpse of Some Latest Publications in Operations Management
• References
 1. McDonald’s
• 2017 → ranked by Forbes as “the King of Restaurants” (The World's
Biggest Restaurants In 2017: Forbes, 2017):
• Sales of $24.6 Billion
• Profit of $4.7 Billion
• Assets of $31 Billion
• Market Value of 106.64$ Billion
 McDonald’s
• 1954 → Small successful restaurant run by brothers Dick and Mac
McDonald, which was impressive in the effectiveness of its
operations (kitchen layout based on assembly line concept)
• Limited menu, concentrating on just a few items – burgers, fries and
beverages – which allowed them to focus on quality and quick
service.
• 1955 → Franchising agent (Ray Kroc) founded McDonald’s System,
Inc.
• 1958 → 100 millionth hamburger sold
 McDonald’s
• 1961 → Ray Kroc bought the exclusive rights to the McDonald’s name
and operating system.
• A restaurant system providing food with consistent superior quality
and fixed preparation methods.
• Franchisees and suppliers buying Kroc’s vision (principle of a 3-legged
stool: one leg was McDonald’s franchisees; the second, McDonald’s
suppliers; and the third, McDonald’s employees)
• Quality, Service, Cleanliness and Value was the way
• Kroc Created the most integrated, effective and inventive supply
system in the food service industry.
2. Operations Management Definition
• Operations management is the management in charge of adding value to
input(s) and transform it into output(s), which could be goods, service or
both.
• There are many available definitions of operations management; however,
all of them provide the same meaning. “Operations is that part of a
business organization that is responsible for producing goods and/or
services.” and “Operations Management is the management of systems or
processes that create goods and/or provide services.” (Stevenson, 2012)
• “Operations management is the set of activities that create value in the
form of goods and services through the transformation of inputs to
outputs.” (Heizer & Render, 2011)
Operations within a production cycle of a
model restaurant
Feedback

Transformation
(Operations)
Value added to
Inputs Outputs
Resources
(Resources) Cooking (Goods and
Labor Serving
Capital Cash Cleric
Services)
Shops Order Processing Food
Equipment Call Centers Drinks
Raw Materials customers’
Energy complaints solved
Fig1: Production cycle of a restaurant
Operations Management Definition
• Goods could be anything that is dealt with daily (finished products),
such as: toothbrush, car, chair, shoe…
• Goods could be also a raw material (CKD in cars, extracted metals
such as copper cathode, subassemblies, parts…) to be used to make
another finished product.

• Service could be any action presented to customers as a non-

physical product, such as health care services, personal care,
education, travel and hospitality, real estate, call-centers, legal
services…
3. Business Organizational Structure
• Any business (goods or service) needs the following functions to
work:
1. Marketing
2. Finance Finance Finance
3. Operations

Marketing Operations

Fig2: Typical business organizational structure

Business Organizational Structure (Service):
Real Estate
Marketing: Make a marketing campaign suitable to the project(s)
Operations (Sales): Contact customers, provide proper presentation,
know the exact needs of every customer, match a property from the
project(s) with the customer’s needs, and finalize the deal
Finance: Provide funds for both Marketing and Operations (Sales)
 Business Organizational Structure (Service):
Real Estate
Finance Finance
1. Provide funds for Marketing campaign
2. Get feedbacks from Marketing team about 1 2 5 6
suitability of finance relevant to the 3
project(s) Operations
Marketing
(Sales)
4
3. Provide solid leads to Operations (Sales) Fig3: business organizational structure (real estate)
4. Contact marketing team with customers
complaints about the provided adds and 5. Provide regular funds for Operations
focal sales point(s), so they can provide (Sales) (wages, running expenses…)
better marketing campaign 6. Get feedbacks from Operations (Sales)
about their required commission funds
during the period
4. Service VS Goods
Service Sector Manufacturing Sector (Goods)
• High degree of customer contact • Low degree of customer contact
• High labor required • Medium to high labor required
• Variable productivity from • Ability to control variability (
customer to customer (no more uniformity obtained – easy
uniformity therefore difficult to to automate)
automate) • Less Intellectual tasks
• Intellectual tasks often • Accurate measurement of
• Difficult for measurement of productivity and quality
productivity and quality evaluation evaluation
• Difficult to patent • easy to patent
Service VS Goods
• How operations are
done is quite similar in
both service and
goods
• However, it is worth
mentioning that most
of the business are a
mix of service and
goods
Fig4: Goods VS service continuum (Stevenson, 2012)
Service VS Goods
• The increased tendency towards
the service sector which affects
clearly the manufacturing sector
is shown in figure 5.
• For every lost job in
manufacturing, several service
jobs will be affected
Example: Losing a milling machine
operator → losing milling
maintenance operator, spare parts
employee, and call center Fig5: U.S. employment - manufacturing VS service sector
employee) from the year 1940 till 2010 (Stevenson, 2012)
5. History of Operations Management
• Operations management has main stations in its development
initiated by KEY people, who are the pioneers to this knowledge.
Their effect led to what’s currently known as operations
management.
• They are credited for the huge development which we have reached
nowadays management of operations which led us to what’s called
industry 4.0 and IOT.
History of Operations Management
Name Known for Year Notes/ Acknowledgments Development now
(foundation of
what’s known as)
Adam Division of labor 1776 Division of labor Specialization
Smith
Eli Parts interchangeability 1870 Manufacturing of muskets by Mass production
Whitney machine
Frederick 1. Father of Scientific 1911 First Bible in IE (The Principles of 1. Management
Taylor Management Scientific Management) 2. Work Study
2. Technical aspects of a Technical Aspects 3. Industrial
work (work methods) Engineering
F. W. Mathematical model for 1915 EOQ, EPQ, LT… Inventory
Harris inventory order size management
Henry Assembly line 1920s 1. Interchangeable parts Mass Production
Ford 2. Division of labor
History of Operations Management
Name Known for Year Notes/ Acknowledgments Development now
(foundation of
what’s known as)
Hugo 1. 1920 1. First Book in Industrial Industrial
Diemer 2. 1930 Engineering Engineering
3. 1985 2. Establishing first IE school
(Penn State University) Management
3. Award of Scientific Engineering
management
Gilbreth Therblig (Time and Motion 1920 Gilbreth couple worked hardly to Work study
Study) focus on the psychology of Ergonomics
worker (human element in job
design)
History of Operations Management
Name Known for Year Notes/ Acknowledgments Development now
(foundation of
what’s known as)
W. Shewhart Statistical procedures 1930s Foundation of statistical quality Statistical quality
for sampling and quality control control
control
Elton Mayo Adding motivation 1930s Extension of Gilbreth work Ergonomics
factor Work Study
Abraham Coined Motivational 1940s Employees Motivation Ergonomics
Maslow Theories 1950s Work Study
Frederick Refined Motivational 1960s
Hertzberg Theories 1970s
Douglas Theory X and Y
McGregor Theory Z
William Ouchi
 History of Operations Management
Name Known for Year Notes/ Acknowledgments Development now
(foundation of what’s
known as)
T. Ohno and S. Lean Manufacturing 1980s Toyota Production System TQM
Shingo Lean Manufacturing
W. Edwards Quality Management 1986 TQM TQM
Deming and Quality planning Six Sigma
Joseph Juran Quality control
Quality improvement
Unknown Mass Customization 1990s 1. Mass customization 1. Mass customization
2. Build to order 2. Build to order
3. Supply Chain Management 3. Supply Chain
Management
Unknown Globalization 2000s 1. E-commerce 1. E-commerce
2. Sustainability 2. Sustainability
3. Outsourcing 3. Outsourcing
4. Agility 4. Agility
Unknown IOT 2010s IOT and Industry 4.0 IOT and Industry 4.0
6. Operations Management Scope
• Forecasting • Performance standards and work
• Capacity Planning: matching supply methods
and demand • Quality control
• Facilities and Layout Planning • Material handling
• Inventory Management • Project management
• Quality • Supply Chain Management
• Employees’ Training and Motivation • Maintenance Management
• Facilities Location
• Scheduling
7. Operations Management and Supply chain
Management
• Supply chain management is the process of managing the consecutive
system of suppliers and customers, which starts with basic input source
and ends with end customers of the system.
• All business organizations have and are part of a supply chain that should
be carefully managed.
• Supply chain management’s main goal is to achieve an economic matching
of supply and demand.
• The operations function is the one in charge for providing the supply or
service for an expected demand.
• “Operations and supply chains are interdependent—one couldn’t exist
without the other, and no business organization could exist without
both” (Stevenson , 2012)
Elements of Supply Chain Management

Fig6: Elements of supply chain management

Famous cases in Supply Chain Management
• Dell: Built-to-Order, Make-to-order
• Tsmc: MicroChips Crisis (after Covid-19)
• Redwood Materials: Sustainability of batteries
Supply Chain Management Decisions
The main areas of deciding in supply chain management are location,
production, distribution, and inventory.
1. Location decision: location of production and distribution facilities
(production, transportation costs, and lead times criteria)
2. Production and distribution decisions focus on what customers
want, when they want it, and how much is needed. Outsourcing can
be a consideration.
3. Distribution decisions affected by
• transportation cost and delivery times
• Capacity (workload balancing) and quality issues
Supply Chain Management Decisions
4. Inventory decisions:
• Inventory needs with accordance to production and stocking
decisions throughout the supply chain.
• Inventory shortage can ruin the schedule of work and lead to
losing customers,
• Inventory excess add unwanted costs
8. Environmental Aspects in Operations
Management
• All parts of a business will be affected by decisions relevant to
sustainability (mainly product and service design, supply chain waste
management, and outsourcing decisions)
• Businesses operations currently focus on green manufacturing:
• Cradle-to-Cradle instead of Cradle-to-Grave
• RRR approaches
• Carbon Footprint accurate calculations
• Environmental, economic and social measures considered in all aspects to
guarantee sustainability
Environmental Aspects in Operations
Management
• Example on outsourcing: Outsourcing decision might lead to the use
of more transportation means leading to more fuel consumption,
leading to more Cox, Nox, Sox wastes and money spent; therefore,
more pollution affecting the environment → sustainability is not
maintained. Therefore , the decision must be studied carefully.
• Green initiative decisions should be taken under operations
management in any business, such as:
• reducing packaging, materials, water and energy use
• Studying well the environmental impact of the supply chain, which might lead
eventually to buy or produce locally
• Reconditioning used equipment for resale and recycling
9. Ethical Conduct in Operations Management
• All the decisions of operations managers should reflect their fair ethical
conduct.
• They should be responsible for their decisions and work within Ethical
Framework; on the other hand, admitting wrong practices if something
went wrong and try to correct it.
• Ethical related subjects in operations managements might be clear in:
1. Financial data: statements, budgets, organization’s financial condition.
(Enron Scandal)
2. Worker safety (Cement and Asbestos)
3. Product safety: products with minimum risk to users or environment.
(murder baby bottles in Victorian era)
Ethical Conduct in Operations Management
4. Quality: warranties, avoiding hidden defects. (VW emissions
scandal (Dieselgate))
5. The environment: preserving the environment. (using alternative
sources to virgin materials especially when the production is huge
(IKEA))
6. The community commitment (Dupont - spilling chemicals to the
rivers)
7. Worker’s rights: Hiring and firing, dealing with workers’ problems
fast and fairly.
Ethical Conduct in Operations Management
Consequences of “Ethical Misconduct” might lead to:
• Management collapse and restructure
• Bad company reputation → Losing customers trust → marketplace
• Lawsuits, fines, and heavy compensations (Asbestos)
• heavy governmental penalties on companies (VW Scandal of exhaust)
• Company dissolution in some cases (ENRON)
10. Why Study Operations Management?
1. Learning about organization of employees in an enterprise
2. Learning how goods and services are produced
3. Understanding the role operations managers do
What Operations Managers Do?
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply chain management
8. Inventory management
9. Intermediate and short-term scheduling
10. Maintenance
Market Place for Operations Management
Students
• The market is full of opportunities for OM graduates. Several OM
authors have mentioned the availability of opportunities in this area.
• More institute granting certificates and knowledge about this field:
• APICS
• American Society for Quality
• Institute for Supply Chain Management
• Project Management Institute
• Council of Supply Chain Management Professionals
11. Latest Trends in Operations
Management
Famous Scientific Journals of Operations
Management
1. Management Science
2. Manufacturing and Service Operations Management (INFORM Journal)
3. Operations Management Research
4. Production and Operations Management
5. Journal of Operations Management
6. Journal of Management Science and Engineering
7. International Journal of Production Research
8. Computers and Industrial Engineering
9. American Journal of Mathematical and Managerial Science
Latest Trend of Research in Operations
Management (PhD Areas of study (Gatech))
• Empirical analysis of supply chain performance
• Specific topics include contracts and global outsourcing; managing
risk and failure; alliances; revenue management.
• Innovation and technology management
• Specific topics include new product development; collaboration and
teamwork; entrepreneurship.
• Sustainable operations
• Specific topics include closed loop supply chain management,
corporate sustainability, and environmental legislation.
(PhD in Operations Management: Scheller College of Business: Georgia Tech, 2021)
Glimpse of Some Latest Publications in
Operations Management
• Labor flexibility integration in workload control in Industry 4.0 era [August
2021] (Costa & Portioli-Staudacher, 2021)
• Sustainability concerns on consumers’ attitude towards short food supply
chains: an empirical investigation [March 2021] (Wang, et al., 2021)
• Internet-of-things enabled supply chain planning and coordination with big
data services: Certain theoretic implications [March 2020] (He, et al., 2020)
• Social responsibility portfolio optimization incorporating ESG criteria
[March 2021] (Chen, et al., 2021)
• Stress testing supply chains and creating viable ecosystems [May 2021]
(Ivanov & Dolgui, 2021)
References
• About Us: McDonalds. (2021). Retrieved November 2021, from McDonalds Website:
https://www.mcdonalds.com
• Chen, L., Zhang, L., Huang, J., Xiao, H., & Zhou, Z. (2021, March). Social responsibility portfolio
optimization incorporating ESG criteria. Journal of Management Science and Engineering, 6(1), 75-85.
• Costa, F., & Portioli-Staudacher, A. (2021, August). Labor flexibility integration in workload control
in Industry 4.0 era. Operations Management Research. doi:https://doi.org/10.1007/s12063-021-00210-2
• He, L., Xue, M., & Guc, B. (2020, March). Internet-of-things enabled supply chain planning and
coordination with big data services: Certain theoretic implications. Journal of Management Science and
Engineering, 5(1 ), 1-2.
• Heizer, J., & Render, B. (2011). Principles of Operations Management (8th ed.). Pearson Education Limited.
• Ivanov, D., & Dolgui, A. (2021, May). Stress testing supply chains and creating viable ecosystems.
Operations Management Research. doi:https://doi.org/10.1007/s12063-021-00194-z
References
• Kalpakjian, S., Schmid, S. R., & Musa, H. (2009). Manufacturing Engineering and Technology (6th ed.).
Prentice Hall.
• PhD in Operations Management: Scheller College of Business: Georgia Tech. (2021). Retrieved November
2021, from Scheller College of Business: Georgia Tech: https://www.scheller.gatech.edu/
• Stevenson, W. J. (2012). Operations Management: Theory and Practice (11th ed.). McGraw-Hill Education.
• The World's Biggest Restaurants In 2017: Forbes. (2017, May 17). Retrieved 2021, from Forbes Website:
https://www.forbes.com
• Wang, M., Kumar, V., Ruan, X., Saad, M., Garza-Reyes, J., & Kumar, A. (2021, March). Sustainability
concerns on consumers’ attitude towards short food supply chains: an empirical investigation. Operations
Management Research. doi:https://doi.org/10.1007/s12063-021-00188-x
Thanks for Listening!