Lesson 01.pptx

Operations
Management
Lesson 01
Introduction

Lecture Outline
1. What is Operations Management?
2. Why Operations Management?
3. The Transformational Model
4. Scope of Operations Management
5. The boundary of Operations Management
6. Operation Strategy and Competitive priorities

At the end of
the lesson
1. Describe Operations in terms of input, transformation, and outputs.
2. Outline the scope of operations.
3. Identify the boundaries of operations.
4. Explain competitive priorities and performance objectives of operations.
5. Explain how an operation strategy is formulated.

Operations Management-
Definitions
• Operations management (OM) is the set
of activities that creates value in the
form of goods and services by
transforming inputs into outputs
• Design, Operation, and improvements
of the system that create the
organization’s goods and services.

Why
Operations
Management?
1. OM is one of three major functions (Marketing, Finance, and
Operations) of any organization.
2. We want to know how goods and services are produced.
3. We want to understand what operations managers do.
4. OM is such a costly part of an organization.

Objectives of Operations
Management
• Produce products with high quality
• Products at competitive prices
• Products with several enhanced features
• Products in a wider variety
• Products delivered with shorter lead times
• Products delivered on time
• Flexibility in fulfilling products demand

The Transformational Model
Input
• Materials
• Equipment
• Labour
Transformation
Process
Output
• Goods
• Service
Feedback
Feedback

Inputs
• Transformed Resources – the
resources that are transformed in
some way by the operation to
produce goods or services that are its
outputs.
• Transforming Resources – the
resources that are used to perform the
transformation process.

Transformation process
• Material Processing – where the input is raw materials, it is
relatively easy to identify the transformation involved, as
when flour is transformed into bread
• Information Processing – where the input is information.
The transformation process can be changing properties of the
information, as accountants do
• Customer Processing – where the customers are transformed
in variety of ways, as hospitals transfer ill patients into
healthy patients.

Output
Goods and Services have basic differences in;
1. Tangibility
2. Storability
3. Simultaneity
4. Transportability
5. Visibility of Production
6. Quality

• Tangible
• Storable
• Production Precedes consumption
• Low visibility
• Transportable
• Quality is evident
• Intangible
• Not Storable
• Simultaneous Production and
Consumption
• High visibility
• Not Transportable
• Quality is difficult to judge
Goods 100%
50% - 50%
Services 100%
Pencil
Production
Automobile
Assembly
Custom-made
clothing
Restaurant
Tax
Consultancy
Legal
Advice

Feedback
• External Sources
• Internal Sources

Scope of
Operations
Management
1. Designing the Operations System
2. Planning and Controlling the Operations System
3. Improving the Performance of the Operations System

The boundary of the operations system
Input Transformation Process Output
Environment
Customers
Suppliers

Productivity and operations management
• Productivity means the number of products or services produced with the resources used
Can be increased by;
• Increase production using similar or a small number of resources
• Reduce the number of resources used while keeping the same level of production or
increasing it.
Productivity =
𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑠 𝑜𝑟 𝑆𝑒𝑟𝑣𝑖𝑐𝑒𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠 𝑢𝑠𝑒𝑑

For example, if units produced = 1,000 and labor
hours used is 250, then productivity?

Collins Title Insurance Ltd. wants to evaluate its labor productivity
with a new computerized title-search system. The company has a
staff of four, each working 8 hours per day. Collins processes and
closes on 8 titles each day. The new computerized title-search
system will allow the processing of 14 titles per day.
Compute Labor productivity with and without the new system.

Operations
strategy and
competitiveness
Operations Strategy
• Broad policies and long-range plans for the
production of the company‘s product/service
and provides a roadmap for what operations
function must do to best support its long-term
competitiveness
• Provides a roadmap for corporate mission
• Must involve both structural and
infrastructural decisions

The Role of
Operations in
Strategy
Development
• Market conditions have changed from a
mass production era with an emphasis on
high volume, low-cost production to an
environment demanding performance on
measures such as quality and speed of
delivery as well as cost.
• In dynamic markets, the ability to forecast
far enough into the future in order to build a
competitive advantage will be limited.
• In dynamic market conditions, the strategic
plan should indicate the general direction
that the organization should follow.

Competitive
priorities
1. Cost or Price
2. Quality
3. Delivery speed
4. Delivery dependability
5. Flexibility
6. Service

Formulation of operations strategy
Business Strategy
Product / Service Plan
Competitive priorities
Operations Strategy
Customer Needs
Competitors’
actions
Process Facilities Vertical Integration Infrastructure

Achieving
Competitive
Advantage
Through
Operations
• Firms achieve missions in three conceptual ways:
1. Differentiation
2. Cost leadership
3. Response
• Competitive advantage implies the creation of a system that
has a unique advantage over competitors.
• Operations managers will more likely be called on to
implement some combination of them.

Competing on Differentiation
• Differentiation is concerned with providing uniqueness.
• Differentiation should be thought of as going beyond both physical characteristics and service
attributes to encompass everything about the product or service that influences the value that the
customers derive from it.
• Effective operations managers assist in defining everything about a product or service that will
influence the potential value to the customer.

Competing on Cost
• Low-cost leadership entails achieving maximum value as defined by your customer.
• It requires examining OM decisions in a relentless effort to drive down costs while meeting
customer expectations of value.
• A low-cost strategy does not imply low value or low quality.
• One driver of a low-cost strategy is a facility that is effectively utilized.

Competing on Response
• Response - including the entire range of values related to timely product development and
delivery, as well as reliable scheduling and flexible performance.
• The response is often thought of as flexible response, but it also refers to a reliable and quick
response.
• The operations manager who develops systems that respond quickly can have a competitive
advantage.

Strategic
Planning, Core
Competencies,
and
Outsourcing
• core competencies - what organizations do as well as or
better than their competitors.
• Outsourcing is transferring activities that have traditionally
been internal to external suppliers.
• Outsourcing implies an agreement (typically a legally
binding contract) with an external organization.
• Outsourcing manufacturing is an extension of the long-
standing practice of subcontracting production activities

Current
Challenges in
Operations
Management
1. Globalization
2. Supply-chain partnering
3. Sustainability
4. Rapid product development
5. Mass customization

Exercise
1. Briefly explain the role of the operations manager in an
organization.
2. What are the skills required?

Operations
managers'
responsibilities
include:
1. Human resource management – the people employed
by an organization either work directly to create a good or
service or provide support to those who do. People and the
way they are managed are key resources of all
organizations.
2. Asset management – an organization’s buildings,
facilities, equipment, and stock are directly involved in or
support the operations function.
3. Cost management – costs of acquiring resources,
transforming them, or delivering them to customers.
Driving down costs through efficient operations
management gives them a critical competitive edge.

Responsibilities
1. Ensure all operations are carried on in an appropriate, cost -effective way.
2. Improve operational management systems, processes, and best practices.
3. Purchase materials, plan inventory, and oversee warehouse efficiency.
4. Help the organization’s processes remain legally compliant
5. Formulate strategic and operational objectives.
6. Examine financial data and use them to improve profitability.
7. Manage budgets and forecasts.
8. Perform quality controls and monitor production KPIs
9. Recruit, train and supervise staff
10. Find ways to increase the quality of customer service

11. Proven work experience as Operations Manager or similar role.
12. Knowledge of organizational effectiveness and operations management.
13. Experience budgeting and forecasting.
14. Familiarity with business and financial principles.
15. Excellent communication skills.
16. Leadership ability.
17. Outstanding organisational skills.
18. Degree in Business, Operations Management or related field.

Skills Required
• Leadership
• Conflict management
• Organization
• Decision-making
• People management
• Data entry skills
• Data processing skills
• Dependable
• Reporting skills
• Deadline-oriented
• Budget development
• Critical thinking skills
• Problem-solving skills
• Planning and organizing
• Communication skills
• Persuasiveness
• Influencing and leading
• Delegation
• Teamwork
• Negotiation
• Adaptability
• Stress tolerance

Lesson 01.pptx

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