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Everybody
 PMGT 6102
Operations Management
• Text Book:
Production and Operations Management:
Richard B. Chase, F. Robert Jacobs,
Nicholas J. Aquilano
Reference Book:
• Operations Management Process
and Value Chains: Krajewski, L. J. &
Krajewski, L. P. Ritzman, , Prentice-Hall Inc.,
New Jersey, 2005
 Chapter-1

Basic concepts of Operations

Management
 Definition of operations Management
‘Operations’ means the production of goods and services
for the business.
Operations management is the branch of management
that administers the complete production timeline of a
service and product from the input stage to the
finished stage, including planning, organizing, and
supervising the operations, manufacturing and
production processes, and service delivery to lead to
the desired outcome of high-quality product and
service that meets the demands of the customers.
The set of interrelated management activities, which are
involved in manufacturing certain products, is called as
production management. If the same concept is
extended to services management, then the
corresponding set of management activities is called
as operations management.
 Why Study OM?
•OM is one of four major functions (marketing, finance,
HRM and operations) of any organization.

•We want (and need) to know how goods and services are
produced.

•We want to understand what operations managers do

OM is such a costly part of an organization.
Operations Manager
An Operations Manager is someone
who runs the operations of a
business or company on a daily
basis. Since Operations
Management is all about efficient
and effective running of
production, an Operations
Managers purpose is to find out
ways by which the company can
become more productive.
Key Decisions of Operations
Managers:
• What
What resources/what amounts
• When
Needed/scheduled/ordered
• Where
Work to be done
• How
Designed
• Who
To do the work
What is process?
The word ‘Process’ came from the Latin
word ‘Procedere’ which means ‘to go
forward’.
Process is a method of doing or producing
something. It is any activity or group of
activities that takes one or more inputs,
transforms them, and provides one or
more outputs for its customers.
 How processes work?
Internal and External customer

Input
•Workers Processes and operations
• Managers
Outputs
• Equipment 3
1 • Goods
• Facilities • Services
• Materials 5
• Land
• Energy 2 4

Information on performance
‘
 Nested Process

Processes can be broken down into sub

processes, which is turn can be broken
down further into still more sub processes.
The concept of a process within a process
as a nested process.
Example of nested process
Bank
Receipt Payment Special Others
Loan Loan

Cheque Customer
Loan/Car Application
receipt
loan, etc. for loan
TK.
Receipt
Application
Ledger for loan Application
Examined
Review
Application
Ledger Review
Entry Tk. Decision
Payment Making
Decision
Making
 Value Chain
A value chain typically consists of (1)
inbound distribution or logistics, (2)
manufacturing operations, (3) outbound
distribution or logistics, (4) marketing and
selling, and (5) after-sales service. These
activities are supported by (1) purchasing or
procurement, (2) research and development,
(3)human resource development, (4) and
corporate infrastructure.
 The Value Chain Model

To analyze the specific activities through

which firms can create a competitive
advantage, it is useful to model the firm as a
chain of value-creating activities. Michael
Porter identified a set of interrelated generic
activities common to a wide range of firms.
The resulting model is known as the value
chain and is depicted below:
 Primary Value Chain Activities

Inbound Outbound Marketing

Operations Service
Logistics Logistics & Sales

The goal of these activities is to create value that

exceeds the cost of providing the product or
service, thus generating a profit margin.
 Inbound logistics include the receiving, warehousing,
and inventory control of input materials.
 Operations are the value-creating activities that
transform the inputs into the final product.
 Outbound logistics are the activities required to get the
finished product to the customer, including warehousing,
order fulfillment, etc.
 Marketing & Sales are those activities associated with
getting buyers to purchase the product, including channel
selection, advertising, pricing, etc.
 Service activities are those that maintain and enhance the
product's value including customer support, repair
services, etc.
 Support Activities

The primary value chain activities

described above are facilitated by
support activities. Porter identified four
generic categories of support activities,
the details of which are industry-
specific.
 Procurement - the function of purchasing the raw
materials and other inputs used in the value-
creating activities.
 Technology Development - includes research and
development, process automation, and other
technology development used to support the
value-chain activities.
 Human Resource Management - the activities
associated with recruiting, development, and
compensation of employees.
 Firm Infrastructure - includes activities such as
finance, legal, quality management, etc.
 Recent Trends in Operations Management :
i. Global Focus: The geographical limitation of
the market has expanded from focusing on
local markets to focus on global markets. This
has occurred due to the rapid development in
communication, globalization and increased
mobility of resources among countries. As a
result countries focus on producing goods and
services at a global scale rather than limiting
themselves to geographical boundaries.
2. Just In Time Production:
In past production was carried out in a
mass production method where there were
batches of goods produced and sold at
mass scale generating economies of scale.
In the modern operations management
era batch production focus has shifted
towards Just In Time production where
goods and services are produced upon the
receipt of order with customizations. It has
reduced the inventory cost drastically.
3. Supply Chain Partnerships:
In past the purchasing activities were carried out based
on the lowest bid where organizations chose the supplier
who provides the lowest bid for a particular order. This
was more short term focused and quality and reliability
was ignored. In modern days the low bid purchasing has
shifted to supply chain partnerships where companies
consider suppliers as a part of their value chain and
build long lasting relationships with suppliers rather than
focusing on short terms gains with low prices.

4. Product Development:
In past the product life cycle was lengthy and when a
product was introduced it stayed in the market for a long
time. But with the rapid expansion of technology the
product life cycle has become short where every product
is replaced by a new product very fast. Due to this
reason companies are not able to have lengthy
product development processes and the forced to
introduce rapid development of new product while
encouraging innovation.
5. Customized Production:
In past there was mass production where production was
made in large scale with standardized production to gain
economies of scale. But with increased flexibility and
competition now companies are forced to customize their
products based on customer requirement and techniques
such as mass customization is used in doing so.

6. Employee Empowerment:
In past employees were treated as just another input to the
production process where they were treated like machines.
There was specialization and workers concerns were
ignored. With the development of Human Resource
Management now firms focus on employee empowerment
where they treat employees as resources that bring
competitive edge to the firm. In this concept the worker’s
concerns are heard and organizations
make arrangements for their welfare and mental/physical
fitness.
7. Green Production
In past the production was focused on obtaining
resources at lowest possible cost and
manufacturing at the lowest cost ignoring the
damage made to the environment. Due to the
initiatives by environment pressure groups
companies are moving towards
green production and green marketing where they
carry out business activities without damaging the
environment by not destroying natural resources,
taking care of forests and wild life and so on.
Thank you
for being
with me