Operations Management

OSP9304

CEMBA 2024

Dept of Organizational Studies; 2024

The Open University of Sri Lanka

S A D Senanayake
 Introduction to Operations
Management

OSP9304
CEMBA 2024
S A D Senanayake
Dept of Organizational Studies; 2024

Adapted from the Presentations of Prof. Chandana Perera, Dept. of Management of Technology University of
Moratuwa and various web resources
• Teaching Plan
• Study method
– Day school sessions
– Resource material
– Active use of concepts in day to day life
– Presentation of live situation with student
participation /assistance
– Evaluations
❖Attendance at day school sessions
– Importance
– Active participation
Learning Objectives of this session

• Define OM
• Explain the role of OM in organizations
• Describe the Strategic role of the OM function
• Recognize the key components of OM related
decision-making
• Identify key historical developments in OM
 The Operations Function
• Operations as a transformation process

• Operations as a basic function

• Operations as a core function

 Operations as a Transformation
Process

INPUTS Conversion OUTPUTS

process

Material Feedback Goods

Machines Compare: actual or
Labor vs. desired
Services,
Management Waste, by-
Capital products
Information and
technology
A Systems View of Operations activity
of an organizaiton
• System
– A collection of objects related by regular
interaction and interdependence

– Operations function is an open system…

give and take with ….
 All operations are transformation
processes
ENVIRONMENT
TRANSFORMED
RESOURCES

MATERIALS
INFORMATION
CUSTOMERS
GOODS
TRANSFORMATION OUTPUT AND
INPUT PROCESS SERVICES

FACILITIES,
STAFF

TRANSFORMING
RESOURCES
Operates within the
ENVIRONMENT
 E.g. Operations function
System Primary Inputs Components Primary Desired
Function(s) Output

Hospital Patients Doctors, Health Care Healthy

Nurses, individual
technicians
Equipment and
other resources
Restaurant Hungry Food, Well Satisfied
Customers Chef,Waiters prepared customer
food, well
served
Automobile repair Faulty car Tools, Mending the Repaired
shop Equipments, fault vehicle
Workers
University SL ??

Cinema Hall ??? Screen Satisfied

movie?? customer
 Transformation Processes
• Physical (manufacturing)
• Locational (transport/storage)
• Exchange (retail)
• Physiological (healthcare)
• Psychological (entertainment)
• Informational (communications)
• What happens in cyber space?
Operations function and associated key functions
• The operations function in the
organization
organization may be in the manufacturing
sector, a service provider, a not-for-profit
organization or a government agency/dept.

• What are the business functions?

– Marketing
– Operations They interact with each
and every function
– Finance
– HRM
 Where does the business get its
competitive advantage?

The
“technological”
specification of its Product/
product/service? Service
Technology

The way it
produces its
goods and
Marketing Operations services?
The way it
positions itself
in its market?
 Some interfunctional relationships between the
operations function and other core and
Engineering/
support functions
Understanding of the
Product/service
technical capabilities and development
function constraints of the function
operations process
Analysis of new
technology options Understanding of
process technology
needs New product and
Accounting service ideas
and finance Provision of
relevant Understanding of the
function data capabilities and
Operations constraints of the
Financial analysis function operations process
for performance
and decisions Market
requirements
Marketing
Understanding of human function
resource needs Understanding
of infrastructural Provision of systems for
and system design, planning and
Recruitment needs control, and improvement
development
and training
Human Information
resources technology
function (IT) function
 Operations Management – Basic Principles

Materials Operations
management is
concerned with Industrial
Information Products & customer /
producing and services end user
Customers
delivering products
and services

All types of enterprises have an operations function, even if

it isn’t called ‘operations’.
Most operations produce both products and services.
What is Operations Management?
Operations management (OM) is defined as

the design, operation, and improvement of

the systems that create and deliver the firm’s

primary products and services.

Operation: planning and controlling

• Operations refers to manufacturing and service processes used
to transform the resources employed by a firm into products
desired by customers.
• For example, a manufacturing process would produce some type
of physical product, such as an automobile or a computer. A
service process would produce an intangible product, such as a
call center that provides information to customers stranded on
the highway or a hospital that treats accident victims in an
emergency room. (Operations and supply chain management / F. Robert Jacobs,
Richard B. Chase, 5thh Ed)
 What is Supply Chain Management?
• refers to processes that move information and
material to and from the manufacturing and service
process of the firm.
-include logistics processes that physically move product
and the warehousing and storage processes that position
products for quick delivery to the customer.
i.e., providing products and service to plants and
warehouses at the input end and the supply of products
and service to customer at the end of the operations
chain.
 Some operations management activities
at a Supermarket Store
Design elegant Design a store layout
which gives smooth Ensure that the jobs of
products which can be all staff encourage their
flat-packed efficiently and effective flow
contribution to
business success

Site stores of an
appropriate size in Continually examine
the most effective and improve
locations operations practice

Maintain Monitor and enhance

cleanliness and quality of service to
safety of storage Arrange for fast customers
area replenishment of
products
 OM in the Organizational Chart
(Manufacturing)

Marketing
Plant Finance

Manager

Purchasing Manufacturing Quality Engineering Disbursements

Sales Production
Assurance Support
Selling Promotion Advertising Control Credit
Fund Control
Source of Funds
Capital
Requirements

Training Scheduling Tooling

Operation Materials Assembly
Control Fabrication
 OM in the Organizational Chart
(Service)

Operations Sales
Finance
(Traffic)
Manager

Engineering Maintenance Ground Flight Traffic Sales Advertising Financial Accounting

Operations Operations Administration Management

New Equipment Station Reservations Passenger Sales Direct Mail Cash Control Revenue
Modification of Line Maintenance Flying Schedules TariffsCargo Newspapers & New Financing Disbursement
Equipment Maintenance Food and Communicatio Periodicals Radio Foreign -
Communications Overhaul n Dispatching Sales General
Commissary and TV Exchange
Engineering Ledger
Sales Promotion
Output of the Operation function-

Service or Good?
 The output from most types of operation is a
mixture of goods and services
Pure goods
Crude oil production

Tangible
Can be stored
Aluminium smelting

Specialist machine tool Production precedes

consumption
Low customer
manufacturer

contact
Can be transported
Quality is evident
Restaurant

Computer systems
services

Intangible
Management

Psychotherapy clinic
consultancy
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to
judge
Pure services
Goods and Services Continuum
Product & Service creation
• Make-to-order
–made to customer specifications after order
received
• Make-to-stock
–made in anticipation of demand
• Assemble-to-order
–add options according to customer
specification
 Dimensions of Operations
IMPLICATIONS IMPLICATIONS
Low repetition High repeatability
Each staff member Low Volume High Specialization
performs more of job Systemization
Less systemization Capital intensive
High unit costs Low unit cost

Well defined
Flexible
Routine
Complex High Variety Low Standardized
Match customer needs
Regular
High unit cost
Low unit costs

Changing capacity Stable

Anticipation Routine
Flexibility High Variation in demand Low Predictable
In touch with demand High utilization
High unit cost Low unit costs

Time lag between

Short waiting tolerance production and
Satisfaction governed by consumption
customer perception Standardized
Customer contact skills Low contact skills
needed High Visibility Low
High staff utilization
Received variety is high
Centralization
High unit cost
Low unit costs
Levels of Operations Management
• Strategic (long-term)
– Long term capacity planning, Process
selection…..
• Tactical (medium-term)
– Production plan for 6 months, HR plan for next
quarter
• Operational (short-term)
– Weekly production schedule, Allocation of
workers for machines……
Competitive Dimensions (Performance Objectives)

• Competing on Cost
• Competing on Quality
– high performance design; conformance to specs
• Competing on Delivery
– Speed; Dependability (Reliability)
• Competing on Time
• Competitive Capability / Flexibility
– Volume, Mix, New Product Intro., customization
• Services
Relative importance of performance
objectives
The influence of the The influence of the
Organization’s customers Organization’s competitors

The relative
importance of each
performance objective
to the operation

The stage of the organization’s products and

services in their life cycle
Order Qualifiers and Winners
•Order qualifiers?
•They are the basic criteria that permit the
firms products to be considered as candidates
for purchase by customers.

•Order winners?
•They are the criteria that differentiates the
products and services of one firm from
another.
Order winners usually focus on one (rarely more than two) of the following
strategic initiatives — price/cost, delivery speed, delivery reliability,
product design, flexibility, after-market service and image
Examples of order winners and qualifiers
• price
• delivery reliability
• delivery speed
• quality
• volume flexibility
• design, including product range, lead times and design leadership
• distribution
• marketing and sales
• brand name and image
• colour range
• being an existing supplier
• technical liaison and support
• after-sales support.
Order winners and qualifiers are both market-specific and time-specific.
 Life Cycles of Products or Services

Maturity
Demand

Decline

Growth

Introduction
Time
 Dealing with Trade-offs
Cost
Traditional
Approach
Flexibility Delivery

Quality

World Class Manufacturing FOCUS FOCUS

Advanced Approaches
FOCUS FOCUS

Trade-offs
5
 World-Class Manufacturing
World-class manufacturers no longer view
cost, quality, speed of delivery, and even
flexibility as tradeoffs.
They have become order qualifiers.

What are the order winners in today’s market?

6
• World class manufacturing is a collection of concepts,
which set standard for production and manufacturing
for another organization to follow.
+ Make to order. + Streamlined Flow.
+ Smaller lot sizes. + Collection of parts.
+ Doing it right first time. + Total preventive
maintenance.
+ Cellular or group manufacturing.
+ Quick replacement. + Zero Defects
+ Just in Time + Increased consistency
+ Higher employee involvement
+ Cross Functional Teams + Multi-Skilled employees
+ Visual Signaling + Statistical process control
 WCM
The main parameters which determine WCM are
quality, cost effective, flexibility and innovation.
The five steps will make the system efficient are as follows:
• Reduction of set up time and in tuning of
machinery: to cut back time in setting up machinery and tune
machinery before production.
• Cellular Manufacturing: production processes are divided
into according to its nature, with similar nature are combined together.
• Reduce WIP material: WIP leads to more cost and decreased
WIP induces more focus on production and fast movement of goods.
• Postpone product mutation: to achieve a higher degree of
customization many changes are made to final product. design stage
implement only after final operation.
• Removal the trivial many and focus on vital few:
focus on production of products which are lined with forecast demand as
to match customer expectation.
Service Breakthroughs
• Service can be an “order winner”
• Augmentations..?

Operations Management OSP9333 Commonwealth Ex MBA FMS-OUSL

 Product as a service
• Digitalization has increased customer interact with
manufacturers. Today, customers expect
engagement and access to their brands. Customers
expect increased personalization, Also known as
Asset-as-a-Service, servitization
• With PaaS, manufacturers can deliver products and
rental support services as part of long- or short-term
subscription contracts. (for a fixed period on rent or
lease )

Operations Management OSP9304 Commonwealth Ex MBA FMS-OUSL

Operations Management
OSP9304
 Business Strategy

Customer Needs Product/Service Plans Competitors’ Actions

Competitive Priorities

Operations Strategy
 Operations Manager’s Job
• The operation’s manager’s job is to manage
the process of converting inputs into desired
outputs.
Strategic Decisions in Operations
DECISIONS
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. Scheduling
10. Maintenance
 Core competence & Competitive advantage
Core competence
• The characteristics made the firm different from the competition. -
if the organization has resources that are not available to the
competition.
A core competence has three defining characteristics:
• It provides potential access to a wide variety of markets.
• It increases perceived customer benefits.
• It is hard for competitors to imitate
Competitive advantage
• the advantage a company has over its rivals in attracting customers
and defending against competitors. Sources of advantage include
factors such as technology, human skills and brand name.
 Historical Perspectives
• Ancient Sri Lanka
• Pre-industrial revolution
• Post industrial revolution
– Introduction of machines
– Management concepts
– Assembly lines
– Marketing ‘Production’ to .. ‘Marketing’.. to
‘wholistic marketing’
– CAD/CAM and Automation
– IT/cloud/AI and operations management
 Source: F. Robert Jacobs

2020-2025
Web applications with customization
• What is Industry 4.0 ?

• What is Industry 5.0 ?

Incorporating cutting-edge technology,
committing to sustainability, and the
needs of remote workers, Big-data, IoT,
I IoT
Customization at mass production!!