Operations Management & Total facilities; managing inventory; controlling

Quality Management (TQM) quality; designing the jobs to make the

product; & designing work methods.
Operations Management is the
management of systems or processes Supply chain - a sequence of
that create goods and/or provide organizations—their facilities, functions,
services. & activities—that are involved in
producing & delivering a product or
 Its role is to transform a service.
company’s inputs into finished
goods or services. Value-added - the difference between
 Goods are physical items the cost of inputs & the value or price of
produced by business outputs.
organizations.
 Services are activities that Efficiency - performing activities well &
at the lowest possible cost.
provide some combination of
time, location, form, or Manufacturing organizations –
psychological value. primarily produce a tangible product
 The collective success or failure (goods) & typically have low customer
of companies’ operations function contact.
has an impact on the ability of a
nation to compete with other - Production of goods result in a
nations, & on the nation’s tangible output.
economy.
Service organizations – primarily
Finance is the function responsible for produce an intangible product, such as
budgeting, managing cash flow, current ideas, assistance, or information, &
assets, & capital investments. typically have high customer contact.

Marketing is a function responsible for - Delivery of service generally

sales, generating customer demand, implies an act.
understanding customer wants & needs,
& provide insights on what competitors
Operations Management Decisions
are doing.
Strategic decisions – decisions that
Operations is the business function that
set the direction for the entire company;
plans, organizes, coordinates, &
they are broad in scope & long-term in
controls the resources needed to
nature.
produce a company’s goods & services.
- What are the unique features of
OM includes designing the product;
our product?
deciding what resources are needed;
arranging schedules, equipment, &
 - What market do we plan to o Physical models - real-
compete in? life counter-parts. The
- What do we believe will be the advantage of these
demand for our product? models is their visual
correspondence with
Tactical decisions – decisions that are
reality. Eg. Miniature
specific & short-term in nature & are
cars, toys, & scale models.
bound by strategic decisions.
o Schematic models - they
- It focus on more specific day-to- have less resemblance to
day issues, such as the quantities the physical reality. Eg.
& timing of specific resources. graphs & charts,
blueprints. & drawings.
Operations Management & Decision o Mathematical models -
Making are the most abstract: Eg.
The chief role of an operations numbers, formulas, &
manager is that of planner & decision symbols.
maker. Operations Management & Decision
What: What resources will be needed, & Making: System
in what amounts?  System – a set of interrelated
When: When will each resource be parts that must work together.
needed? When should the work be  In a business organization, the
scheduled? When should materials & organization can be thought of as
other supplies be ordered? When is a system composed of
corrective action needed? subsystems, which in turn are
composed of lower subsystems.
Where: Where will the work be done?  “the whole is greater than the
sum of its individual parts.”
How: How will the product or service be
 A systems perspective is
designed? How will the work be done
essential whenever something is
(organization, methods, equipment)?
being designed, redesigned,
How will resources be allocated?
implemented, improved, or
Who: Who will do the work? otherwise changed.

Operations Management & Decision Operations Management & Decision

Making: Models Making: Establishing Priorities

 A model is an abstraction of  Pareto phenomenon - a few

reality, a simplified representation factors account for a high
of something. percentage of the occurrence of
some event(s).
 o This concept can be focused on improving output by
applied at all levels of redesigning jobs & determining
management & to every acceptable levels of worker
aspect of decision making, output.
both professional & o Frederick Winslow
personal. Taylor - father of scientific
management.
The Historical Evolution of  1st , it assumed that
Operations Management workers are
 Industrial Revolution – an motivated only by
industry movement that changed money & are limited
production by substituting only by their
machine power for labour physical ability.
power.  2nd the separation of
 It began in the 1770s in England management &
& spread to the rest of Europe & labour.
to the United States during the  Henry Ford - employed scientific
19th century. management techniques in his
 Craft production – a system in factories.
which highly skilled workers use o Mass production – a
simple, flexible tools to produce system in which low-skilled
small quantities of customized workers use specialized
goods. (slow & costly) machinery to produce high
 James Watt – invented the volumes of standardized
steam engine in 1764. (factory) goods.
 Adam Smith – published “The
The Historical Evolution of
Wealth of Nations” in 1776.
Operations Management
(division of labour) - production
of a good is broken down into a  Human Relations movement
series of small, elemental tasks., (1930s – 1960s) - a philosophy
each of which is performed by a based on the recognition that
different worker. factors other than money can
 Eli Whitney - introduced the contribute to worker productivity.
concept of interchangeable
parts in 1790. Hawthorne studies – the studies
responsible for creating the human
The Historical Evolution of relations movement, which focused on
Operations Management giving more consideration to workers’
needs. (Hawthorne Effect)
 Scientific management – an
approach to management that
Elton Mayo conducted studies at the production through elimination of waste
Hawthorne (Illinois) division of Western & continuous improvement.
Electric.
Total quality management (TQM) – a
Job enlargement - an approach in philosophy that seeks to improve quality
which workers are given a larger portion by eliminating causes of product defects
of the total task to do. & by making quality the responsibility of
everyone in the organization.
Job enrichment - workers are given a
greater role in planning. Reengineering - redesigning a
company’s processes to increase
The Historical Evolution of efficiency, improve quality, & reduce
Operations Management costs.
 Management science - a field of Today’s Operations Management
study that focuses on the
development of quantitative  E-business - the use of
techniques to solve operations electronic technology to facilitate
problems. business transactions.
 The 1st mathematical model for  Electronic commerce (e-
inventory management was commerce) - the use of the
developed by F. W. Harris in Internet for conducting business
1913. activities, such as
 Many quantitative tools emerged communication, business
to solve problems in forecasting, transactions, & data transfer.
inventory control, project  The Internet was developed from
management, & other areas of a government network called
operations management. Eg. ARPANET created in 1969 by the
Linear Programming. U.S. Defence Department.
 Data analytics - applying
The Influence of Japanese mathematics & statistics to large
Manufacturers volumes of structured &
 Customers demand better quality, unstructured data to gain
greater speed, & lower costs. unprecedented business insights.
Eg. POS, RFID, GPS.
Lean systems - a concept that takes a
total system approach to creating Environmental Concerns
efficient operations.  Sustainability – using resources
Just-in-time (JIT) - a philosophy in ways that do not harm
designed to achieve high-volume ecological systems that support
human existence.
It includes climate change, energy use, • Craft production – a system in
environmental contamination, & which highly skilled workers use
resource depletion, are all part of the simple, flexible tools to produce
contemporary business landscape. small quantities of customized
goods. (slow & costly)
Stricter environmental regulations,
particularly in developed nations, are • Division of Labor - production of
being imposed. a good is broken down into a
series of small, elemental tasks,
The ecological challenge facing all
each of which is performed by a
organizations requires managers to
different worker.
formulate strategies that preserve &
conserve natural resources & control • Scientific management – an
pollution. approach to management that
focused on improving output by
Operations Management & Decision
redesigning jobs & determining
Making: Ethical Conduct
acceptable levels of worker
 Ethics - a standard of behaviour output.
that guides how one should act in
• World War II caused a dramatic
various situations.
increase in emphasis on quality
Business Ethics – principles of conduct control.
within organizations that guide decision
• 1960s - 70s – an oil embargo
making & behaviour.
instituted by the Organization of
 It comprises organizational Petroleum Exporting Countries
principles, values, & norms that (OPEC) caused an increase in
may originate from individuals, energy costs.
organizational statements, or
from the legal system that
The Foundations of Modern Quality
primarily guide individual & group
Management: The Gurus
behaviour in business.
o First, to survive, • Walter Shewhart - known as the
businesses must earn a “father of statistical quality
profit. control.” He developed control
o Second, businesses must charts for analyzing the output of
address the needs & processes to determine when
desires stakeholders. corrective action was necessary.

The Evolution of Quality Management • W. Edwards Deming - a

statistics professor at New York
University in the 1940s, went to
 Japan after World War II to assist understanding the costs &
the Japanese in improving quality benefits of quality, recognizing
& productivity. His message was the consequences of poor quality,
that the cause of inefficiency & & recognizing the need for ethical
poor quality is the system, not the behavior.
employees.
The Determinants of Quality
• Joseph M. Juran - viewed
• Quality of design - intention of
quality as fitness-for-use. He
also believed that roughly 80% of designers to include or exclude
quality defects are management features in a product or service.
controllable; thus, management • Quality of conformance – the
has the responsibility to correct degree to which goods or
this deficiency. services conform to the intent of
• Philip B. Crosby - developed the the designers.
concept of zero defects & • Ease of use - a basic concept
popularized the phrase “Do it that describes how easily users
right the first time.” can use a product. (user
• Taiichi Ohno & Shigeo Shingo - instructions)
developed the philosophy & • Service after delivery –
methods of kaizen, a Japanese aftersales
term for continuous
improvement. Benefits of Good Quality

The Dimensions of Quality • an enhanced reputation for

quality, the ability to command
• Quality - the degree to which premium prices, an increased
performance of a product or market share, greater customer
service meets or exceeds loyalty, lower liability costs, &
customer expectations. fewer production or service
▫ Performance – problems—which yields higher
Expectations = productivity, fewer complaints
Performance from customers, lower production
Expectations. costs, & higher profits.

• Successful management of The Consequences of Poor Quality

quality requires that managers • Loss of business - failure to
have insights on various aspects devote adequate attention to
of quality. These include defining quality can damage a profit-
quality in operational terms, oriented organization’s reputation
 & lead to a decreased share of Principles of Total Quality
the market. Management (TQM)

• Liability - due to damages or 1. Meeting the needs &

injuries resulting from either faulty expectations of customers - it
design or poor workmanship. may be referred to as ‘customer
centricity’ or the ‘voice of the
• Productivity - Poor quality can customer.
adversely affect productivity
during the manufacturing process 2. Covering all parts of the
if parts are defective & have to be organization - every single part
reworked. of it, each department, each
activity, & each person & each
• Costs - the cost to remedy a level, must work properly
problem is a major consideration together, because every person &
in quality management. The every activity affects & in turn is
earlier a problem is identified in affected by others.
the process, the cheaper the cost
to fix it. 3. Includes every person in the
organization - every person in
Total Quality Management (TQM) the organization has the potential
• A philosophy that involves to contribute to quality.
everyone in an organization in a 4. all costs of quality are
continual effort to improve considered - getting things ‘right
quality & achieve customer the 1st time.’ Determine where
satisfaction. mistakes are likely to occur & try
▫ TQM expands the to prevent them.
traditional view of quality— 5. developing the systems &
looking only at the quality procedures which support
of the final product or quality & improvement - there
services—to looking at the must be a continual striving to
quality of every aspect of improve all business & production
the process that produces processes. on-time delivery, order
the product or service. entry efficiency, billing error rate,
• It is a philosophy of how to customer satisfaction,
approach quality improvement. cycle time, scrap reduction, &
supplier management, are
good places to begin.

4. developing a continuous
process of improvement - the
 philosophy of continually seeking must focus on improving
ways to improve processes processes.
based on a Japanese concept
called kaizen. 3. Added costs - TQM might add
training, infrastructure & team
Advantages of Total Quality development costs.
Management (TQM)
4. Time - it might take years for an
1. Less product defects - an organization to fully show
objective of TQM is to create intended results.
products & services correctly the
1st time. 5. Partial efforts - because of the
effort involved in implementing
2. Satisfied customers - High- TQM, a partial move toward it
quality products that meet can result in failure.
customers' needs result in higher
customer satisfaction.

3. Lower costs - as a result of less

product defects, companies save
money on customer support,
product replacements, field
service & creating product fixes.

4. Well-defined cultural values -

organizations that practice TQM
develop & nurture core values
around quality management &
continuous improvement.

Disadvantages of Total Quality

Management (TQM)

1. Planning & resources - TQM

needs a significant amount of
resources & planning over time to
be properly allocated to the
change.

2. Companywide commitment -
continuous improvement in TQM
means the organizational culture