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MODULE IN OPERATIONS MANAGEMENT

(CBMC 102)

FOR

BACHELOR OF PUBLIC ADMINISTRATION

Prepared by

Allan Hil B. Pajimola, PhD

Chairperson, BPA Program

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PREFACE

This Module in Operations Management (CBMC 102) was prepared to

facilitate the teaching – learning process of Bachelor of Public Administration
students at this time of COVID – 19 Pandemic since the thrusts among higher
education institutions (HEIs) is continuity of learning. The learners are expected to
be more or less independent in their educational activities since there are still
restrictions on face-to-face classroom set-up. With the advent of flexible modality,
the university encourages the use of combined alternative modes of instructional
delivery – such as this and supplemented by online mode via various platforms.

This course Operations Management is technically a business related

subject since the target is to provide substantive insights and ideas on how to
manage the dynamics and competitions in the business world. Nonetheless, the
idea of this instructional material is to customize somehow the learning contents
as well as the learning activities to fit in the needs of Public Administration. As such,
the students are expected to explore and deepen their imaginations on how to
connect and relate the concepts, principles, theories and ideas to be learned to
their field of specialization.

Operations Management aims to provide the student with an analytical

approach to the economic problems of planning and deploying human
resources, materials, plus facilities and equipment to generate goods and/or
services for the marketplace. Course emphasis will be on the application of the
analytical tools to address critical issues related to strengthening the competitive
position of the enterprise, such as: product or service design, process engineering
and work systems design, management of technology and innovation,
environment-friendly design, capacity planning, plant location and facilities
layout, logistics and supply chain management, total quality management,
operations scheduling, and performance management.

The contents are carefully selected to decongest crowded learning

competencies. Despite of this, the learners should not plainly rely on what is written
in this module. Rather, it is deeply encouraged that they have to do their remedial
reading from available reading resources online.

So, read on, learn and widen your horizons. Keep safe and we hope to see
you by next semester!

AHPAJIMOLA

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MODULE I

THE FUNDAMENTALS OF OPERATIONS MANAGEMENT

 INTRODUCTION

Technically, operations management is a subject intended for business related

courses since it encompasses planning, implementing, and supervising the production of
goods or services. Operations managers have responsibilities in both strategy and day-
to-day production, in either manufacturing or services. Sometimes called production
management, the field is cross-functional, tying in with other departments such as sales,
marketing, and finance. It is involved in product or service creation, development,
production, and distribution. In effect, it connects dots along the value chain.
Nonetheless, public administration, being a field study that deals on management of the
public service, also finds its relevance and significance especially that government sector
now should be acting like a business entity in terms of dealing with clients and customers
In this module, it consists of four (4) lessons. These are the fundamentals of
operations management, competitiveness, strategy and productivity, product and
service design.

LEARNING OUTCOMES
At the end of this module, students are expected to:

 Define, elaborate and explain operations management as a field of study

 Relate the principles and theories of operations management to the realities
besetting government sector;
 Explain competitiveness, strategy and productivity as concepts in operations
management
 Distinguish product versus service design

 DIRECTIONS/ MODULE ORGANIZER

There are four lessons in this module. Read each lesson carefully then answer the
exercises/activities to find out how much you learned from it. Work on these exercises
carefully and submit your output to your teacher during the scheduled face-to-face
meeting. In case you encounter difficulty, discuss this with your teacher either through
online platforms, email, phone or during the scheduled face to face meeting. Read on
and enjoy learning away from school. Keep safe.

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Module 1

The Fundamentals of Operations Management

Learning Outcomes:
Understand the fundamentals of operations management as key element in the
service sector that public administration caters to
Elaborate, describe and characterize key concepts such as competitiveness,
strategy and productivity, forecasting, and product and service design as may be
applied in the field of public administration

Lesson 1 Introduction to Operations Management

Lesson 2 Competitiveness, Strategy and Productivity
Lesson 3 Forecasting and Forecasting Methods
Lesson 4 Product and Service Design

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Lesson 1:

 Introduction to Operations Management

Definition of Operations Management

Operations management is the administration of business practices to create the
highest level of efficiency possible within an organization. It is concerned with
converting materials and labor into goods and services as efficiently as possible
to maximize the profit of an organization. Operations management teams
attempt to balance costs with revenue to achieve the highest net operating profit
possible.

Operations management focuses on carefully managing the processes to

produce and distribute products and services. A great deal of focus is on
efficiency and effectiveness of processes. Therefore, operations management
often includes substantial measurement and analysis of internal processes.

Ultimately, the nature of how operations management is carried out in an

organization depends very much on the nature of the products or services in the
organization, for example, agriculture, mining, construction or general services.
Here are some additional perspectives on the field.

"Operations management is chiefly concerned with planning, organizing and

supervising in the contexts of production, manufacturing or the provision of
services." – TOPMBA

"Operations management is an area of management concerned with designing

and controlling the process of production and redesigning business operations in
the production of goods or services."

Understanding Operations Management

 Operations management involves utilizing resources from staff, materials,
equipment, and technology. Operations managers acquire, develop, and
deliver goods to clients based on client needs and the abilities of the
company.

 Operations management handles various strategic issues, including

determining the size of manufacturing plants and project management
methods and implementing the structure of information technology networks.
Other operational issues include the management of inventory levels,

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including work-in-process levels and raw materials acquisition, quality control,

materials handling, and maintenance policies.

 Operations management entails studying the use of raw materials and

ensuring minimal waste occurs. Operations managers utilize numerous
formulas, such as the economic order quantity formula to determine when
and how large of an inventory order to process and how much inventory to
hold on hand.

Special Considerations
 A critical function of operations management relates to the management of
inventory through the supply chain. To be an effective operations
management professional, one must be able to understand the processes that
are essential to what a company does and get them to flow and work
together seamlessly. The coordination involved in setting up business processes
in an efficient way requires a solid understanding of logistics.

 An operations management professional understands local and global trends,

customer demand and the available resources for production. Operations
management approaches the acquisition of materials and the use of labor in
a timely, cost-effective manner to deliver customer expectations. Inventory
levels are monitored to ensure excessive quantities are on hand. Operations
management is responsible for finding vendors that supply the appropriate
goods at reasonable prices and have the ability to deliver the product when
needed.

 Another large facet of operations management involves the delivery of goods

to customers. This includes ensuring products are delivered within the agreed
time commitment. Operations management also typically follows up with
customers to ensure the products meet quality and functionality needs. Finally,
operations management takes the feedback received and distributes the
relevant information to each department to use in process improvement.

 Operations managers are involved in coordinating and developing new

processes while reevaluating current structures. Organization and productivity
are two key drivers of being an operations manager, and the work often
requires versatility and innovation.

What Are Goods and Services?

A product is a tangible offering to a customer, whereas a service is an intangible
offering. The former is usually a one-time exchange for value. In contrast, a service
usually involves a longer period.

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The value of a product is inherent in the tangible offering itself, for example, in the
can of paint or pair of pants. In contrast, the value of a service often comes from
the eventual benefit that the customer perceives from the time while using the
service.

In addition, the customer often judges the value of a service based on the quality
of the relationship between the provider and the customer while using the service.

There are certain differences between manufactured goods and services,

including that services can have simultaneous (in the moment) production and
consumption, are perishable (there is no inventory management), ownership
(ownership of the service is not owned by the customer) and tangibility (it is
difficult to evaluate). These features make operations management more of a
challenge in services.

Operations Management Specific Roles

1. Chief Operating Officer
The chief operating officer (COO), also called the chief operations officer,
is one of the highest-ranking executive positions in an organization,
comprising part of the "C-Suite". The COO is responsible for the daily
operation of the company, and routinely reports to the highest-ranking
executive, usually the chief executive officer (CEO). The COO is usually the
second in command at the firm, especially if the highest-ranking executive
is the Chairman and CEO.

2. Operations Manager
A useful definition of the role of an operations manager comes from
Investopedia: "Operations management is the administration of business
practices to create the highest level of efficiency possible within an
organization. Operations management is concerned with converting
materials and labor into goods and services as efficiently as possible.
Corporate operations management professionals try to balance costs with
revenue to maximize net operating profit." They oversee product
development and delivery, inventory and supply chain management,
operations staffing and job design, and production. They oversee an
organization's key operations and, thus, they usually have a wide and
strategic view of the organization. The specific duties of the role depend on
the nature of the product and service that the company produces and
provides, for example, in agriculture, industry or construction.

What are Operations Systems?

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It can seem overwhelming to read about the numerous activities involved in

operations management. One wonders where they fit into an organization. How
are they connected? This is where a systems view is very helpful.

What is a System?
Simply put, a system is an organized collection of parts that are highly integrated
to accomplish an overall goal. The system has various inputs, which go through
certain processes to produce certain outputs, which together, accomplish the
overall desired goal for the system.

For example, an automobile is a system. Its inputs are gasoline, a driver, a steering
mechanism, tires, as well as various tubes, pipes and electrical cords. The system's
processes are when they work together to burn the gasoline, resulting in the
systems outputs of the tires moving and the car steering as the driver prefers. The
overall system's desired goal is a very useful automobile.

What is an Operations System?

The primary activities in operations management is a system -- they are all
integrated and aligned with each other. The operations manager's job is to
ensure they are all effectively and efficiently working together in order to produce
the desired goal of useful goods and services for customers.

An operations system includes, for example:

1. Inputs -- such as expertise, best practices, funding, equipment, facilities and
technologies, as well as the customer's feedback and the overall
organization's strategic priorities
2. Processes -- such as planning (capacity, product and service design,
production, facilities, jobs, inventory, quality control, etc.) and managing
productivity to produce high-quality products and services
3. Outputs -- high-quality products and services
4. Outcomes -- very satisfied customers

Feedback from customers should be continually collected and considered as an

input to the processes of the planning the development and production of goods
and services. In that way, the operations system is really a recurring loop of
outcomes, which, in turn, influence the inputs to the next round of the system.

Align Operations Systems with Strategic Planning

Notice that one of the inputs to the operations system is the strategic priorities of
the organization. It is critical that the operations system be closely integrated and
aligned with the purpose (the mission) and priorities (strategic goals) of the

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organization. Otherwise, the system will not be operating as effectively as it should

be. For the system to be operating as efficiently as it should be, there should be
closely integrated and aligned parts within the system.

LET US ANSWER THIS!

Based on what you have read, define in your own words the following:
1. Operations management
2. Operations manager
3. Operations system
4. Chief operating system

Essay
1. How can operations management be applied in the government sector?
Explain and expound your answer by giving three (3) specific illustrations.
2. Can we consider the Mayor, Governor or President as Chief Operating
Officer or Chief Executive Officer? Why?

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Lesson 2:

 Competitiveness, Strategy and Productivity

Competitiveness
We have all competed in various types of activities, perhaps in sports, or school.
There may have been prizes or rewards for ranking high in these competitions.
Business is no different. We define competitiveness as the ability and performance
of a firm to sell and supply goods and services in a given market, in relation to the
ability and performance of other firms. In other words, how will one firm win over
customers in order to become the product or service of choice?

Competitive Advantage and Key Purchasing Criteria

Competitive advantage is the advantage a business has over its competitors. This
can be gained by offering clients better and greater value. Advertising products
or services with lower prices or higher quality piques the interest of consumers. This
is the reason behind brand loyalty, or why customers prefer one particular
product or service to another.

Each organization needs to have a deep understanding of their customers and

what drives their customers to make purchases. We refer to these as key
purchasing criteria. They are the factors, which customers evaluate and consider
when making a product choice. It is important to keep in mind that the customer
is not always a consumer purchasing a good at a store. The customer in many
instances may be another business.

Key Purchasing Criteria include:

 Price – Firms need to understand how much the customer will pay for an
item. If products are seen to be very similar to one another, the customer
will choose based on price.
 Quality – Many customers are willing to spend more in order to obtain a
product with specific characteristics or brand reputation. Not only are we
considering a product with a great design, but also, one that is long lasting
and defect free.
 Variety – There is a part of the market that value the opportunity to choose
from a wide variety of products. They look for options to change the style,
colour, dimensions or technical characteristics.
 Timeliness – Some customers care greatly about how long it will take to
obtain the product or service. For companies’ in the transportation
business, this will be a key necessity in order to gain new customers. This can

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also be related to the capability of the company to deliver at the time that
they had promised.

Order qualifiers versus order winners

Two concepts related to key purchasing criteria are order qualifiers and order
winners, first introduced by Terry Hill. For important purchases, the customers will
consider which characteristics are necessary (nonnegotiable) and which
characteristics can actually lead them to make their decision.

Order qualifiers are those characteristics that are “the nonnegotiable

requirements” of the customer. Unless these characteristics are part of the
product or service package, the customer will look elsewhere. Order qualifiers for
a car may include and minimum safety features, and air conditioning.

An order winner is the characteristic that wins the order. Often it may be a new
technical feature that is desirable. It could be a great warranty package or
service agreement, or a better price.

Order qualifiers and order winners change over time. What was an order winner
some years ago, may now become an order qualifier and vice versa. In 1989, air
conditioning in a car might have been considered an order winner. It was new
and desirable. In 2020 however, few customers purchasing a new car would
consider buying a car without air conditioning. It has therefore changed from an
order winner to an order qualifier.

Marketing must understand what the order qualifiers and order winners are for
their customers. Operations must respond promptly to ensure that they are
making these options and features available to customers.

Competitive Priorities
The competitive priorities are the ways in which the Operations Management
function focuses on the characteristics of cost, quality, flexibility and speed. The
firm’s customers will determine which of the competitive priorities are emphasized.

Cost. Firms whose customers prioritize price will be very interested in having
processes that enable them to keep their costs low. These companies are
typically paying close attention to identifying and eliminating waste within their
operations. By reducing defects, they will reduce costs. These firms will closely
monitor and seek to improve their productivity. Factors such as resource utilization
and efficiency will be important.

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Quality. Firms whose customers prioritize quality focus on creating both excellent
product and process design. Marketing and Engineering collaborate to design
products that meet customers’ requirements. Manufacturing must ensure that
the process is able to produce the products defect-free. It is only by having
excellent design quality and excellent process quality that the organization can
ensure that customers will have their expectations satisfied.

Flexibility. Firms whose customers prioritize variety must prioritize the ability to
change rapidly. Firms who value flexibility usually do so by carefully choosing
equipment that is general-purpose and able to perform multiple functions. They
will often strive to keep a small amount of spare capacity in case it is needed.
Multi-skilled employees who are able to work in various areas of the firm or
operate multiple types of technology are valued. These firms want to ensure that
they can get new products to market quickly and transition from making one
product to another quickly. Keeping machine set-ups fast is a critical way to do
this. They also strive to be able to abruptly modify the volume of their output in
case the need or opportunity arises.

Delivery (reliability and speed) – Firms whose customers prioritize speed of

product/service delivery must be very efficient and quick at providing their
products and services. McDonald’s and Amazon are examples of this.

Below is a table summarizing the relationship between a customer’s priority and

a firm’s strategy.
Customer’s
Firm’s strategy
priority

Cost Minimizing product costs and waste, maximizing productivity

Quality Designing superior, durable products, minimizing defects

Adaptability in product design and output, utilizing general-

Flexibility purpose machinery and multi-skilled workers

Delivery Maintaining reliable and speedy delivery services

It is a long-held understanding that each major decision that needs to be made

within the operations of an organization will include a trade-off because it is
impossible for anyone organization to excel on all the competitive priorities at
once! An example is a manufacturer who competes based on cost. In order to

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reduce defects, they may choose to change one of their input components for
one with a better quality. This however will increase their costs. Cost and quality
are common trade-offs. Flexibility and speed are also considered trade-offs.
When organizations increase their number of options and varieties, it adds
operational complexity. This will slow down their operations.

Core Competency (Core Capabilities)

Core competency is a management theory that originated in a 1990 Harvard
Business Review article, “The Core Competence of the Corporation.”

Core competencies are the resources and capabilities that comprise the
strategic advantages of a business. A modern management theory argues that
a business must define, cultivate, and exploit its core competencies in order to
succeed against the competition.

Core competencies are the defining characteristics that make a business or an

individual stand out from the competition. Identifying and exploiting core
competencies are as important for a new business making its mark as for an
established company trying to stay competitive.

A company’s people, physical assets, patents, brand equity, and capital all can
make a contribution to a company’s core competencies. A successful business
has identified what it can do better than anyone else can, and why. Its core
competencies are the “why.”

Defining Core Competencies

In the article, C.K. Prahalad, and Gary Hamel review three conditions a business
activity must meet in order to be a core competency:
1. The activity must provide superior value or benefits to the consumer.
2. It should be difficult for a competitor to replicate or imitate it.
3. It should be rare.

Some examples of core competencies:

1. McDonald’s has standardization. It serves nine million pounds of French fries
every day, and every one of them has precisely the same taste and texture.
2. Apple has style. The beauty of its devices and their interfaces gives them
an edge over its many competitors.
3. Walmart has buying power. The sheer size of its buying operation gives it the
ability to buy cheap and undersell retail competitors.

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Strategy
The Strategy Hierarchy
In most corporations, there are several levels of management. Strategic
management is the highest of these levels in the sense that it is the broadest and
applies to all parts of the firm while also incorporating the longest time horizon. It
gives direction to corporate values, corporate culture, corporate goals, and
corporate missions. Under this broad corporate strategy, there are typically
business-level competitive strategies and functional unit strategies.

Corporate strategy refers to the overarching strategy of the diversified firm. Such
a corporate strategy answers the questions of “in which businesses should we
compete?” and “how does being in these businesses create synergy and/or add
to the competitive advantage of the corporation as a whole?”

Business strategy refers to the aggregated strategies of a single business firm or a

strategic business unit (SBU) in a diversified corporation. According to Michael
Porter, a firm must formulate a business strategy that incorporates either cost
leadership, differentiation or focus in order to achieve a sustainable competitive
advantage and long-term success in its chosen arenas or industries.

Functional strategies include marketing strategies, new product development

strategies, human resource strategies, financial strategies, legal strategies, supply-
chain strategies, and information technology management strategies. The
emphasis is on short- and medium-term plans and is limited to the domain of each
department’s functional responsibility. Each functional department attempts to

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do its part in meeting overall corporate objectives, and hence to some extent
their strategies are derived from broader corporate strategies.

Many companies feel that a functional organizational structure is not an efficient

way to organize activities, so they are reengineered according to processes or
SBUs. A strategic business unit is a semi-autonomous unit that is usually responsible
for its own budgeting, new product decisions, hiring decisions, and price setting.
An SBU is treated as an internal profit center by corporate headquarters.

An additional level of strategy called operational strategy was encouraged by

Peter Drucker in his theory of Management By Objectives (MBO). It is very narrow
in focus and deals with day-to-day operational activities such as scheduling
criteria. Operational level strategies are informed by business level strategies
which, in turn, are informed by corporate level strategies.

Operations strategy categories can be broken down into many types of areas
that must be addressed. The decisions made in these areas will determine
whether the business strategy is executed. Below is a list of 10 critical decisions in
operations management:
1. Design of Goods and Services – The actual design of the product or service
will have the largest impact on the cost to produce and the quality to
achieve.
2. Quality – The way in which the organization will ensure that the product
specifications are met. This may include the use of statistical process
control, total quality management or Six Sigma.
3. Process and Capacity Design – The type of product along with its volume
and variety will have the major impact on which type of process to be
chosen.
4. Location – Important decisions such as how many locations and where to
locate them are critical to organization success. This will be a major factor
in terms of how quickly the transformation process can take place, and
how quickly goods can be shipped to customers.
5. Layout Design and Strategy – Consider the placement of work centres,
movement of goods, people and information How materials are delivered
and used.
6. Human Resources and Job Design – Decisions regarding training for
employees, how to motivate employees to achieve operational success.
7. Supply Chain Decisions – Decisions in terms of where suppliers are located
and the level of supplier collaboration are major considerations that impact
cost and delivery speed.
8. Inventory – How will inventories be used and controlled in the business and
the supply chain

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9. Scheduling – includes both how to schedule production, resources and

employees in order to be effective, efficient and meet commitments to
customers.
10. Maintenance– This involves maintaining equipment and machinery as well
as keeping quality high and processes stable.

Common Operations Strategies

There are many types of Operations strategies; two of the most common are
quality-based strategies and time-based strategies.
1. Quality-based strategies are commonly used when companies wish to
elevate their reputation in the marketplace. Improving on their product
design and the reduction of errors are the backbone of these initiatives.
Firms will often use programs such as ISO9001, Six Sigma, and Total Quality
Management in their efforts.

2. Time-based strategies are used to reduce lead-time, which is the amount

of time elapsed from the receipt of the customer’s order until the products
are shipped. Firms that can produce faster will often have lower costs. These
companies may use lean production methods to improve the velocity of
their processes.

Productivity
In operations, we love to measure. One of the key ways we judge our operational
performance is by using a simple holistic measure, which is productivity.
Productivity is referred to
as a relative measure. It
has little meaning in
isolation but does tell a
story when it is
compared to the
previous period, or to a
similar department or
organization. The key
thing we pay attention
to is whether the productivity has improved or declined or stayed the same. Let’s
look at several types of productivity measures, and how to calculate the percent
change.

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Output is always a reflection of

how much the firm was able to
produce. If the product is
homogenous, meaning it has
very little variations, then
expressing output as the
number of units produced may
be reasonable. If, however, the
firm makes a variety of products with different levels of labour and material costs,
then the output would likely be described by the dollar value of all the goods
produced within a certain time period.

For inputs, dollars spent are typically used as the measure. Several exceptions
might be labour hours, gallons of water, or kilowatts of electricity. Firms will
typically measure the productivity for the things which represent significant
expenditures. A farmer might measure the pounds of meat produced as the
output and the pounds of feed consumed as the input.

Competitiveness and Productivity in the Government Sector: How?

1. ISO Certification in Government Sector - SO (International Organization for
Standardization) is the world’s largest developer and publisher of
International Standards. ISO is a network of the national standards institutes
of 161 countries, one member per country, with a Central Secretariat in
Geneva, Switzerland, that coordinates the system. Standards make an
enormous and positive contribution to most aspects of our lives. They ensure
desirable characteristics of products and services such as quality,
environmental friendliness, safety, reliability, efficiency and
interchangeability - at an economical cost.
2. Strategic Performance Management System - A mechanism prescribed by
the Civil Service Commission that links employee performance with
organizational performance to enhance the performance orientation of
the compensation system. This is done through:
a. Office Performance Commitment and Review - A process in which
the performance of a delivery unit is determined by comparing its
accomplishments with its work targets within a certain rating period.
b. Individual Performance and Commitment Review - A process in
which the performance of an employee is determined by comparing
his/her accomplishments with his/her work targets within a certain
rating period.
3. Adherence to Anti-Red Tape Act – The law that increases transparency and
promote honesty and responsibility in government service delivery. The Act

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included simplifying measures to reduce red tape in service transactions,

and it established a formal corruption prevention tool for service provision.
he citizen charter was a document that “communicates, in simple terms,
information on the services provided by the government to its citizens. It
describes the step-by-step procedure for availing a particular service, and
the guaranteed performance level that they may expect for that service.”

LET US ANSWER THIS!

A. Comment on the following issues/ syndrome in government/ public sector on

competitiveness and productivity whether it is RAMPANT or NOT RAMPANT,
then justify by 2-3 sentences only:
1. “Pe-text, pe-text lang sa opisina”
2. Government employees doing online selling
3. 15/30 government employee
4. Attending seminars abroad for pleasure
5. Many signatories before government releases a document

B. There are four key criteria of competitiveness in business. These are

a. Price
b. Quality
c. Variety
d. Timeliness
QUESTION: How can our government be competitive along the four key
criteria mentioned above? Explain each.

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Lesson 3:

 Forecasting and Forecasting Methods

What is Forecasting?
Forecasting is the process of making predictions of the future based on past and
present data and most commonly by analysis of trends. A commonplace
example might be estimation of some variable of interest at some specified future
date. Prediction is a similar, but more general term. Both might refer to formal
statistical methods employing time series, cross-sectional or longitudinal data, or
alternatively to less formal judgmental methods. Usage can differ between areas
of application: for example, in hydrology the terms "forecast" and "forecasting"
are sometimes reserved for estimates of values at certain specific future times,
while the term "prediction" is used for more general estimates, such as the number
of times floods will occur over a long period.

Risk and uncertainty are central to forecasting and prediction; it is generally

considered good practice to indicate the degree of uncertainty attaching to
forecasts. In any case, the data must be up to date in order for the forecast to be
as accurate as possible. In some cases the data used to predict the variable of
interest is itself forecast.

What is a forecasting model?

Forecasting models are one of the many tools businesses use to predict outcomes
regarding sales, supply and demand, consumer behavior and more. These
models are especially beneficial in the field of sales and marketing. There are
several forecasting methods businesses use that provide varying degrees of
information. From the simple to the complex, the appeal of using forecasting
models comes from having a visual reference of expected outcomes.

Four common types of forecasting models

While there are numerous ways to forecast business outcomes, there are four
main types of models or methods that companies use to predict actions in the
future. You'll have a better understanding of how companies use these methods
to enhance their business practices and improve the customer experience with
the following examples of common forecasting models:
 Time series model
 Econometric model
 Judgmental forecasting model
 The Delphi method

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1. Time Series Model - This type of model uses historical data as the key to reliable
forecasting. You'll be able to visualize patterns of data better when you know
how the variables interact in terms of hours, weeks, months or years. While
there are several methods of completing a time series model, you can follow
these general steps in Microsoft Excel to estimate outcomes using information
gleaned from recent analytical data:

 Have your time-based data available for use (time series and values
series).
 Input the compiled data involving time or duration in the first column.
 Insert remaining values you want to forecast in the next column.
 Select relevant data
 Click the Data tab, then select Forecast Group, then choose Forecast
Sheet.
 Access the sheet, then select the line or bar graph option you want to
use.
 In the Forecast End box, determine your end date and hit Create.
 Once you've set up your forecasting model, you will then move onto
interpreting it to formulate your best estimation of the future.

2. Econometric Model - Those employed in the field of economics often use an

econometric model to forecast changes in supply and demand, as well as
prices. These models incorporate complex data and knowledge throughout
the process of creation. Like the name infers, this type of statistical model
proves valuable when predicting future developments in the economy. Here
is the basic structure behind this type of model:

 Decide what your independent and dependent variables are. Which

economic relation do you want to test? For example, you may ask "Does X
have an effect on Y?"
 Formulate a hypothesis to test this relationship. Consider other factors that
may have an affect on Y and label them Z, also known as the control
variables.
 Gather the data set encompassing Y, Z and X.
 Plot this data to find any anomalies or outliers.
 Determine whether the relationship between Y and X is linear, quadratic or
something else.
 Calculate the transformations using a mathematical method you
understand.
 Interpret the effect that Y has on X. What is the significance of X in relation
to your hypothesis?
 Add the W variables to this regression to further analyze your findings.

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3. Judgmental Forecasting Model - Various forecasting models of the judgmental

kind utilize subjective and intuitive information to make predictions. For
instance, there are times when there is no data available for reference.
Launching a new product or facing unpredictable market conditions also
creates situations in which judgmental forecasting models prove beneficial.
Here are some characteristics of judgmental models
 Takes a subjective, opinionated approach
 Assumes specific variables
 Comes with limitations
 Accuracy improves with the addition of new information
This type of forecasting model is especially helpful in the field of research and
development. Focus groups and expert panels can provide insight that no
computerized model would have. For instance, when surveying a group of
people about what they look for in a product, companies can better assess
their direction when developing specific product features.

4. The Delphi method - This method is commonly used to forecast trends based
on information given by a panel of experts. This series of steps is based on the
Delphi method, which is in reference to the Oracle of Delphi. It assumes that a
group's answers are more useful and unbiased than answers provided by one
individual. The total number of rounds involved may differ depending on the
goal of the company or group's researchers. These experts answer a series of
questions in continuous rounds that ultimately lead to the "correct answer" a
company is looking for. The quality of information improves with each round
as the experts revise their previous assumptions following additional insight
from other members in the panel. The method ends upon completion of a
predetermined metric. Here is a list of steps you can take to make your own
judgmental forecasting model:

 Select a facilitator. Before choosing a facilitator who will manage the

discussion, consider the neutrality of the individual and the person's
experiences conducting research. The head of research and development
may choose this role, for example.
 Choose your experts. When businesses conduct research on a product that
is not yet on the market, they rely on a panel of anonymous experts who
can weigh in on the matter. Experts can be anyone with substantial
experience in a given topic. For example, in the instance of developing a
new swim product, a company may reach out to instructors or safety
experts in the field. They may even approach professional athletes or loyal
customers who use similar products.

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 Define the problem. Companies looking to solve a problem must first

provide the details surrounding the problem, as well as the significant
details that can help them make an informed decision. This ensures that
everyone understands what is being asked of them. Businesses may want
to create a new monofin with features that none of their competitors have
tried before.
 Round one questions. This first round of questions introduces the topic and
starts the conversation. The experts will read the information, provide
anonymous feedback and submit their information back to the facilitator.
 Round two questions. After the facilitator has reviewed the answers
provided by the panel, edited content, filtered out irrelevant data and
scanned through the content to find common themes, the facilitator then
submits new information to the panel. Members of the panel have the
chance to review the previous responses anonymously and based on the
new information, can resubmit a response to another's statement. They
again send their responses back to the facilitator.
 Round three questions. For possibly the last time, the facilitator will review
the new responses and again sort through the information presented
before sending out the surveys to the panel. However, the process may
continue until a general consensus is achieved, which can end in three or
four iterations.
 Take action. Once the researchers have received sufficient information,
they can move ahead with any plans to implement their findings. This may
be the start of new product development or the start of production on an
item they were unsure about.

Artificial Intelligence Methods

Companies in the field of technology use methods of artificial intelligence (AI) to
forecast a specific area of growth. This forecasting method provides extremely
accurate results using mathematical algorithms. The science behind artificial
intelligence predicts numerous user outcomes and helps generate those "you
may also like" suggestions that appear on certain sites.

Here are some examples of popular forecasting methods using artificial

intelligence:

1. Recommendations for products and content. Large online companies use

AI to predict customer behavior on their sites, including the likelihood of a
purchase in the future. In addition, site users receive recommended
products through a practice called collaborative filtering. Offering relevant
results to shoppers takes place by clustering and interpreting consumers'

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data in conjunction with profile info and demographics. More data

produces higher quality results.

Example: You're looking at a board game called Fender Bender on a

popular online shopping site. You scroll down to the bottom of the web
page that there are similar games suggested, based on those who like
Fender Bender.

2. Search engine accuracy. Methods of artificial intelligence drive the

accuracy of results you see appear on the search engine optimization
page (SERP). Google uses an algorithm based on machine learning to
provide searchers with quality results and now other companies in the e-
commerce sector use similar techniques of artificial intelligence to improve
their search engines as well.
Example: You're searching for "boots for women" using a popular search
engine. You click the search icon and see a page of results that shows
boots for women. Many of them provide winter boots, dressy boots, rain
boots, and other suggestions so you decide to narrow your search even
further and type in "winter boots for women," then click the search button
again to see a more curated list of results.

3. Predictive analytics. Companies use artificial intelligence to enhance the

customer service experience by looking at information for data sets and
predicting future trends. Call center managers can make decisions about
the number of employees needed to staff a particular day or week utilizing
the information provided through AI technology.
Example: A manager of a call center checks his computer software to see
a forecast of how many calls the company may have that day. He decides
to have four people on staff and let the rest take the day off.

Use of Forecasting in the Government Sector

1. Winning chances of political candidate in a certain position.
2. Growth of economy through projections using base previous data like
employment rate, GDP, GNP etc.
3. Health issues like projection of COVID 19 positive cases
4. Manpower or human resources needed in various industries
5. Growth and development of local government units
6. Influx of tourists in the country

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LET US ANSWER THIS!

After reading the discussions above, define the following terms in your own words:
a. Forecasting
b. Prediction
c. Forecasting model

Application: Using the 4 forecasting models discussed above – time series model,
econometric model, judgmental model and Delphi model, explain what would
be the fate of our country by December, 2020 on COVID 19 positive cases if you
are going to forecast. (Answer can be hypothetical and imagine yourself that you
are in-charge of data banking and analysis of COVID 19 Cases in the Philippines).

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Lesson 4:

 Product and Service Design

Product Design
 Product design is the process of identifying a market opportunity, clearly
defining the problem, developing a proper solution for that problem and
validating the solution with real users.
 Product design consists in imagining and creating objects meant for mass
production. The definition encompasses the physical aspects as well as the
functionalities products should possess.
 Designing a new product goes through an analytical process and relies on a
problem-solving approach to improve the quality of life of the end user and
his or her interaction with the environment. It is about problem-solving, about
visualizing the needs of the user and bringing a solution.
 Product designers also work with other professionals such as engineers and
marketers. While not in charge of designing the purely mechanical and
technological aspects of the product, they are however concerned with
usability.
 Product design has many fields of application: medical devices, tableware,
jewelry, sports and leisure, food preservation appliances, furniture, etc.
 It takes into consideration also the production cost, the manufacturing
processes and the regulations.

Product Design Process

There are various product design processes and many focus on different aspects.
One example formulation/model of the process is described by Don Koberg and
Jim Bagnellin in "The Seven Universal Stages of Creative Problem-Solving." The
process is usually completed by a group of people with different skills and
training—e.g. industrial designers, field experts (prospective users), engineers (for
engineering design aspects), depending upon the nature and type of the
product involved. The process often involves figuring out what is required,
brainstorming possible ideas, creating mock prototypes and then generating the
product. However, that is not the end. Product designers would still need to
execute the idea, making it into an actual product and evaluating its success
(seeing if any improvements are necessary).

The product design process has experienced huge leaps in evolution over the last
few years with the rise and adoption of 3D printing. New consumer-friendly 3D
printers can produce dimensional objects and print upwards with a plastic like
substance opposed to traditional printers that spread ink across a page.

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The product design process, as expressed by Koberg and Bagnell, typically

involves three main aspects:
 Analysis
 Concept
 Synthesis

Depending on the kind of product being designed, the latter two sections are
most often revisited (e.g. depending on how often the design needs revision, to
improve it or to better fit the criteria). This is a continuous loop, where feedback is
the main component. Koberg and Bagnell offer more specifics on the process: In
their model, "analysis" consists of two stages, "concept" is only one stage, and
"synthesis" encompasses the other four. (These terms notably vary in usage in
different design frameworks. Here, they are used in the way they're used by
Koberg and Bagnell.)

1. Analysis
 Accept Situation: Here, the designers decide on committing to the
project and finding a solution to the problem. They pool their
resources into figuring out how to solve the task most efficiently.
 Analyze: In this stage, everyone in the team begins research. They
gather general and specific materials which will help to figure out
how their problem might be solved. This can range from statistics,
questionnaires, and articles, among many other sources.
2. Concept
 Define: This is where the key issue of the matter is defined. The
conditions of the problem become objectives, and restraints on the
situation become the parameters within which the new design must
be constructed.
3. Synthesis
 Ideate: The designers here brainstorm different ideas, solutions for
their design problem. The ideal brainstorming session does not involve
any bias or judgment, but instead builds on original ideas.
 Select: By now, the designers have narrowed down their ideas to a
select few, which can be guaranteed successes and from there they
can outline their plan to make the product.
 Implement: This is where the prototypes are built, the plan outlined in
the previous step is realized and the product starts to become an
actual object.
 Evaluate: In the last stage, the product is tested, and from there,
improvements are made. Although this is the last stage, it does not

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mean that the process is over. The finished prototype may not work
as well as hoped so new ideas need to be brainstormed.

Service Design
Service design is the activity of planning and organizing people, infrastructure,
communication and material components of a service in order to improve its
quality and the interaction between the service provider and its users. Service
design may function as a way to inform changes to an existing service or create
a new service entirely.

The purpose of service design methodologies is to establish best practices for

designing services according to both the needs of users and the competencies
and capabilities of service providers. If a successful method of service design is
adapted then the service will be user-friendly and relevant to the users, while
being sustainable and competitive for the service provider. For this purpose,
service design uses methods and tools derived from different disciplines, ranging
from ethnography to information and management science to interaction
design. Service design concepts and ideas are typically portrayed visually, using
different representation techniques according to the culture, skill and level of
understanding of the stakeholders involved in the service processes (Krucken and
Meroni, 2006)

Service design practice is the specification and construction of processes that

delivers valuable capacities for action to a particular user. Service design
practice can be both tangible and intangible and it can involve artifacts or other
elements such as communication, environment and behaviors. Several authors of
service design theory including Pierre Eiglier, Richard Normann, Nicola Morelli,
emphasize that services come to existence at the same moment they are being
provided and used. In contrast, products are created and "exist" before being
purchased and used. While a designer can prescribe the exact configuration of
a product, s/he cannot prescribe in the same way the result of the interaction
between users and service providers, nor can s/he prescribe the form and
characteristics of any emotional value produced by the service.

Consequently, service design is an activity that, among other things, suggests

behavioral patterns or "scripts" to the actors interacting in the service.
Understanding how these patterns interweave and support each other are
important aspects of the character of design and service. This allows greater user
freedom, and better provider adaptability to the users' behavior.

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History
Early service design and theory
Early contributions to service design were made by G. Lynn Shostack, a bank and
marketing manager and consultant, in the form of written articles and books. The
activity of designing service was considered to be part of the domain of
marketing and management disciplines in the early years.[15] For instance, in
1982 Shostack proposed the integration of the design of material components
(products) and immaterial components (services). This design process, according
to Shostack, can be documented and codified using a "service blueprint" to map
the sequence of events in a service and its essential functions in an objective and
explicit manner. A service blueprint is an extension of a user journey map, and this
document specifies all the interactions a user has with an organization throughout
their user lifecycle.

Servicescape is a model developed by B.H. Booms and Mary Jo Bitner to

emphasize the impact of the physical environment in which a service process
takes place and to explain the behavior of people within the service environment,
with a view to designing environments that accomplish organizational goals in
terms of achieving desired behavioral responses.

Service Design Education and Practice

In 1991, service design was first introduced as a design discipline by professors
Michael Erlhoff and Brigit Mager at Köln International School of Design (KISD). In
2004, the Service Design Network was launched by Köln International School of
Design, Carnegie Mellon University, Linköpings Universitet, Politecnico di Milano
and Domus Academy in order to create an international network for service
design academics and professionals.

In 2001, Livework, the first service design and innovation consultancy, opened for
business in London. In 2003, Engine, initially founded in 2000 in London as an
ideation company, positioned themselves as a service design consultancy

Service Design Principles

1. Human-centered: Consider the experience of all the people affected by
the service.
2. Collaborative: Stakeholders of various backgrounds and functions should
be actively engaged in the service design process.
3. Iterative: Service design is an exploratory, adaptive, and experimental
approach, iterating toward implementation.
4. Sequential: The service should be visualized and orchestrated as a
sequence of interrelated actions.

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5. Real: Needs should be researched in reality, ideas prototyped in reality, and

intangible values evidenced as physical or digital reality.
6. Holistic: Services should sustainably address the needs of all stakeholders
through the entire service and across the business.

Public Sector Service Design

Public sector service design is associated with civic technology, open
government, e-government, and can be either government-led or citizen-led
initiatives. The public sector is the part of the economy composed of public
services and public enterprises. Public services include public goods and
governmental services such as the military, police, infrastructure (public roads,
bridges, tunnels, water supply, sewers, electrical grids, telecommunications, etc.),
public transit, public education, along with health care and those working for the
government itself, such as elected officials. Due to new investments in hospitals,
schools, cultural institutions and security infrastructures in the last few years, the
public sector has expanded. The number of jobs in public services has also grown;
such growth can be associated with the large and rapid social change that is
calling for a reorganization. In this context, governments are considering service
design for a reorganization of public services.

What Makes A Good Design?

1. Good design is innovative. The possibilities for innovation are not, by any
means, exhausted. Technological development is always offering new
opportunities for innovative design. But innovative design always develops
in tandem with innovative technology, and can never be an end in itself.
2. Good design makes a product useful. A product is bought to be used. It
has to satisfy certain criteria, not only functional, but also psychological and
aesthetic. Good design emphasizes the usefulness of a product whilst
disregarding anything that could possibly detract from it.
3. Good design is aesthetic. The aesthetic quality of a product is integral to its
usefulness because products we use every day affect our person and our
well-being. But only well-executed objects can be beautiful.
4. Good design makes a product understandable. It clarifies the product’s
structure. Better still, it can make the product talk. At best, it is self-
explanatory.
5. Good design is unobtrusive. Products fulfilling a purpose are like tools. They
are neither decorative objects nor works of art. Their design should
therefore be both neutral and restrained, to leave room for the user’s self-
expression.
6. Good design is honest. It does not make a product more innovative,
powerful or valuable than it really is. It does not attempt to manipulate the
consumer with promises that cannot be kept.

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7. Good design is long-lasting. It avoids being fashionable and therefore

never appears antiquated. Unlike fashionable design, it lasts many years –
even in today’s throwaway society.
8. Good design is thorough down to the last detail. Nothing must be arbitrary
or left to chance. Care and accuracy in the design process show respect
towards the user.
9. Good design is environmental-friendly. Design makes an important
contribution to the preservation of the environment. It conserves resources
and minimizes physical and visual pollution throughout the lifecycle of the
product.
10. Good design is as little design as possible. Less, but better – because it
concentrates on the essential aspects, and the products are not burdened
with non-essentials. Back to purity, back to simplicity.

LET US ANSWER THIS!

Definition of Terms: For reinforcement of what you have read, define in your own
words or the way you understood it the following terminologies:
a. Product design
b. Service design
c. Public sector service design
d. Servicescape
e. Service design practice
f. Product design process

Essay: Answer briefly the following:

a. Compare and contrast product design versus service design.
b. Think a government product or a government service that is needing
improvement. If you are going to re-design it, how it would be to make it a
good design?

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MODULE SUMMARY

In this module, you learned the fundamentals of operations management.

Operations management is the administration of business practices to create the
highest level of efficiency possible within an organization. It is concerned with
converting materials and labor into goods and services as efficiently as possible
to maximize the profit of an organization. Operations management teams
attempt to balance costs with revenue to achieve the highest net operating profit
possible. Operations management is concerned with converting materials and
labor into goods and services as efficiently as possible. Corporate operations
management professionals try to balance costs with revenue to maximize net
operating profit.

Competitiveness or competitive advantage of a firm denotes its ability to

achieve market superiority over its competitors. In other words, how effectively an
organization meets the needs of customers relative to other organizations of the
same specialization represents its competitive advantage. Productivity is defined
as a total output per one unit of a total input. In control management,
productivity is a measure of how efficiently a process runs and how effectively it
uses resources.

Forecasting is a decision-making tool used by many businesses to help in

budgeting, planning, and estimating future growth. In the simplest terms,
forecasting is the attempt to predict future outcomes based on past events and
management insight. Judgement forecasting uses only our intuition and
experience. Judgment forecasting is best where there is little to no historical data.
Quantitative forecasting uses analytics to analyze large amounts of historical
data in order to discern trends and patterns. Quantitative forecasting is excellent
at churning through large amounts of data and is less prone to bias. However, it
is weakest when there is little to no historical data that can be analyzed.

Product and service design refers to the entire process of engineering a

potential future product or service, including its form, fit, and function. Life cycle
planning is the concept and practice in firms providing goods and services to
plan strategically for the phases of a product’s or service’s life. After several
research and development-related stages, including product conceptualization
and technical demonstration, operations is concerned with these stages:
introduction, growth, maturity, and decline.

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SUMMATIVE TEST

A. True or False. Identify whether the statement is TRUE if it depicts acceptable fact or
FALSE if it depicts the contradiction. Write your answer on the space provided before the
number.
1. The meaning of holistic principle of service design is that the
service should be visualized and orchestrated as a sequence
of interrelated actions.
2. The aesthetic quality of a product is integral to its usefulness
because products we use every day affect our person and our
well-being.
3. The purpose of service design methodologies is to establish
best practices for designing services according to both the
needs of users and the competencies and capabilities of
service providers.
4. The Delphi method is commonly used to forecast trends based
on information given by a panel of experts
5. Corporate strategy refers to the overarching strategy of the
diversified firm.
6. Quality based strategies are used to reduce lead time
7. Output is always a reflection of how much the firm was able to
produce.
8. Forecasting and prediction are just one and the same.
9. Time series model uses historical data as the key to reliable
forecasting
10. Product design consists in imagining and creating objects
meant for mass production.

B. Identification. Write your answer on the space provided before the number.
1. This forecasting method provides extremely accurate results
using mathematical algorithm.
2. It consists in imagining and creating objects meant for mass
production.
3. Who espoused the three main aspects of product design
process?
4. It is the specification and construction of processes that
delivers valuable capacities for action to a particular user.
5. Who was the earliest pioneer in service design?
6. It is associated with civic technology, open government, e-
government and can be either government – led or citizen led
initiatives.

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7. It is an operation strategy that deals on the way in which

organization ensure that product specifications are met.
8. It is a tangible offering to a customer.
9. It focuses on carefully managing the processes to produce
and distribute product and services.
10. It is commonly used to forecast trends based on information
given by a panel of experts.

C. Application of Service Design.

Situation: In government sector, the most appropriate offering they can share to the
citizens or the public is SERVICE. However, the services being offered by the public sector
is marred with corruption, red tape, bureaucratic, slow and other irregularities. As a public
administration student, you are mandated to pursue good governance and public
accountability of these governmental services. What would you do to improve the
following: (answer should be specific and per item) – 5 points each.

a. Service Delivery
b. Public Image of the Public or Civil Servants
c. Government Websites
d. Online Transactions
e. Frontline Officer/ Frontline Desk

D. Essay
Why it is important to study operations management for a public administration like
you?

Congratulations for a job well-done!

End of Module 1

Module in Operations Management (CBMC 102)