1-1 Introduction to Operations Management

Introduction to
Operations Management

Dr. Md Shamimul Islam

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
1-2 Introduction to Operations Management

Operations Management (OM)

Definition
OM is the management of systems, which transform
inputs into value-added products and/or services.

Primary Functions
Organization

Finance Operations Marketing

Support Functions – R&D, HR, PR, Accounting, etc.

1-3 Introduction to Operations Management

Value-Added

The difference between the cost of inputs

and the value or price of outputs.
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
1-4 Introduction to Operations Management

Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
1-5 Introduction to Operations Management

Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
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Manufacturing or Service?

Tangible Act
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The goods–service continuum

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Production of Goods vs. Delivery of Services

• Production of goods – tangible output

• Delivery of services – an act (Intangible)

• Service job categories

• Government
• Wholesale/retail

• Financial services

• Healthcare
• Personal services

• Business services

• Education
1-9 Introduction to Operations Management

Manufacturing vs Service

Characteristic Manufacturing Service

Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
1-10 Introduction to Operations Management

Scope of Operations Management

• Operations Management includes:
• Forecasting
• Capacity planning

• Scheduling

• Managing inventories

• Assuring quality

• Motivating employees

• Deciding where to locate facilities

• Supply Chain Management (SCM)

• And more . . .
 1-11 Introduction to Operations Management

Operations Function

• The operations function

• Consists of all activities directly related to producing
goods or providing services
1-12 Introduction to Operations Management

Types of Operations

Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling,
banking, renting, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, email, telephone,
satellites
1-13 Introduction to Operations Management

Responsibilities of Operations Manager

Planning Organizing
– Capacity – Degree of centralization
– Location – Process selection
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling/Improving – Issuance of work orders
– Inventory – Job assignments
– Quality
– Costs
– Productivity
1-14 Introduction to Operations Management

Business Operations Overlap

Operations

Marketing Finance
1-15 Introduction to Operations Management

Operations Interfaces
Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS
1-16 Introduction to Operations Management
DECISION MAKING

Operations management professionals make a number of

key decisions that affect the entire organization. These
include:
What: What resources will be needed, and in what amounts?
When: When will each resource be needed? When should
the work be scheduled? When should materials and other
supplies be ordered? When is corrective action needed?
Where: Where will the work be done?
How: How will the product or service be designed? How
will the work be done (organization, methods, equipment)?
How will resources be allocated?
Who: Who will do the work?
1-17 Introduction to Operations Management

Role of Models in DECISION MAKING

Model: An abstraction of reality; a simplified

representation of something.
Models are sometimes classified as
• Physical (Crash tests)
• Schematic (Blueprints)
• Mathematical

What are the pros and cons of models?

1-18 Introduction to Operations Management
Models Are Beneficial

• Increase understanding of the problem

• Enable “what if” questions

• Consistent tool for evaluation and standardized

format
• Power of mathematics

• If easy to use and less expensive

• Requires users to organize

 Limitations of Models
1-19 Introduction to Operations Management

• Quantitative information may be emphasized over

qualitative
• Nonqualified users may not comprehend
(understand) the rules on how to use the model
• Models may be incorrectly applied and results
misinterpreted
• Use of models does not guarantee good decisions
always.
1-20 Introduction to Operations Management
Role of Quantitative Approaches
in DECISION MAKING
• Quantitative approaches to problem solving often
embody an attempt to obtain mathematically optimal
solutions to managerial problems.
• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models
 Analysis of Trade-Offs
1-21 Introduction to Operations Management

in DECISION MAKING
• Decision on the Customer Cost
amount of inventory
to stock
Inventory
• Increased cost of
holding inventory Level of
customer
Inventory
Vs. service

• Loss of customers
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Systems Approach

“The whole is greater than

the sum of the parts.”

Suboptimization
 Recent trends in Operations
1-23 Introduction to Operations Management

Management( 2023…
• Digital Transformation
• Supply Chain Visibility

• Sustainability

• Resilience

• E-commerce Integration

• Demand Forecasting

• Supplier Relationship Management

• Circular Economy

• Risk Management
 Recent trends in Operations
1-24 Introduction to Operations Management

Management
• Talent Development
• Lean and Agile Principles
• Reshoring and Nearshoring
• Regulatory Compliance
• Ethical Sourcing
• Warehouse Automation
• Data Analytics
• Customer-Centric Supply Chains
1-25 Introduction to Operations Management
Other Important Trends

• Ethical behavior
• Operations strategy

• Working with fewer resources

• Revenue management

• Process analysis and improvement

• Increased regulation and product liability

• Lean production
• Combination of Mass Production (high volume, low unit
cost) and Craft Production (variety and Flexibility)
1-26 Introduction to Operations Management
Jobs in Operations and Supply
Chain
• Operations Manager
• Supply Chain Manager Three supply chain jobs
• Production Manager suggested by Forbes
• Quality Manager • Logistics Manager
• Logistics Manager • Materials Manager
• Operations Analyst • Supply Chain Manager
• Procurement Manager
• Inventory Manager
• Project Manager Sources: Supply Chain Career
• Facilities Manager Paths: Consider These 4 Jobs .
• Continuous Improvement Forbes advisor, Retrieved from
Manager [Link]
• Safety Manager ducation/supply-chain-
• Operations Director management-jobs/
• Plant Manager
• Customer Service Manager
1-27 Introduction to Operations Management
Employement growth in Operations
and Supply Chain

Source: The Supply Chain Economy and the Future of Good Jobs in America (2018). Harvard Business
Review. Retrieved from: [Link]
america
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Historical Evolution of Operations Management

• Industrial revolution era (1770’s) [Steam Engine – 1769

(James Watt), Division of Labor – 1776 (Adam Smith)]

• Scientific management era (1911’s) [Principles of Sc. Mgt.

– 1911 (Fredrick Winslow Taylor), Gantt Chart – 1912 (Henry L.
Gantt), Moving Assembly Line – 1913 (Henry Ford), Inventory
Models – 1915 (F.W. Harris)

• Human relations movement era (1920-60) [Hawthorne

Studies – 1930 (Elton Mayo), Statistical Process Control – 1935
(H.F. Dodge and et al.), Motivation Theories -1940 (Maslow), 1950
(Frederick), 1960 (McGregor)]
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Historical Evolution of Operations Management

• Management science era [Linear programming – 1947
(George Dantzig), Digital Computer – 1951 (Remington Rand),
Simulation, Waiting Line Theory, Decision theory, PERT
(Performance Evaluation Review Technique)/CPM (Critical Path
Method) – 1950s to 1960s (various)]

• Quality revolution era [Lean Production – 1970s (Taiichi

Ohno), JIT - 1980s (Toyota), TQM – 1980S to 1990s (W. Edward
Deming, Joseph Juran and et al.)

• Process revolution era [Computer Integrated Manufacturing

(CIM), Concurrent Engineering – 1980s to 1990s (various)
Reengineering – 1990s (Michael Hammer and James Champy)]