OPERATIONS

MANAGEMENT

Dr. Weerawat Khawsuk

Rangsit University International College

IPO 201 1/6/2025

 What is operation management?

Why is operations management

important in all types of organizations?
KEY What is the input-transformation-output
process?
QUESTIONS What is the process hierarchy?

How do operations (and processes)

differ?
What do operations managers do?
 WHAT IS OPERATIONS MANAGEMENT?
It is about how organizations create and deliver services and
products.
 The activity of managing the resources
that create and deliver services and
products

All organizations have operations that

produce some mix of services and
products
Every organization has an operations
WHAT IS function because every organization
OPERATION creates some type of service and
MANAGEMENT? product.
Operation managers are the people who
have particular responsibility for managing
some of the resources that comprise the
operations function.
• In some organizations, the operation manager
could be called by some other name.
• Ex. Fleet manager, administrative manager, or
store manager.
 OPERATIONS FUNCTIONS IN
VARIOUS ORGANIZATIONS
• Internet Service Provider • Fast-food chain
• Maintain and update • Locate potential sites for
hardware restaurants
• Update software and • Provide processes and
content equipment to produce burger
• Respond to customer queries • Maintain service quality
• Implement new services • Develop, install and maintain
• Ensure security of customer equipment
data • Reduce impact on local area
• Reduce packaging waste
 OPERATIONS FUNCTIONS IN
VARIOUS ORGANIZATIONS
• International aid charity • Furniture manufacturer
• Provide aid and • Procure appropriate raw
development projects for materials and components
recipients • Make sub-assemblies
• Provide fast emergency • Assemble finished products
response when needed • Deliver products to
• Procure and store customers
emergency supplies • Reduce environmental
• Be sensitive to local cultural impact of products and
norms processes
 OPERATIONS IN PRACTICE
• Read textbook on page 5 – 6 :
LEGOLAND and LEGO both rely on their
operation managers

It illustrates how important the operations

functions is for any company whose reputation
depends on creating high-quality, sustainable
and profitable products and services
 OPERATION IN THE ORGANIZATION

• Three core functions of any organization

• Marketing function – responsible for positioning and
communicating the organization’s services and
products to its markets to generate customer demand
• Product/Service development function – responsible for
developing new and modified services and products to
generate future customer demand
• Operations function – responsible for the creation and
delivery of services and products based on customer
demand
 OPERATION IN THE ORGANIZATION

• There are the support functions that enable the core

functions to operate effectively
• Accounting, finance function
• Technical function
• Human resource function
• Information system function
• There is not always a clear division between functions
• Operations managers need to cooperate with other
functions to ensure effective organizational performance
 It is easy to visualize the operations function and
what it does even if we have never seen it.

Any business that creates something must use

resources, so must have an operations activity.
OPERATIONS
MANAGEMENT
IMPORTANCE
Operations management uses not just machines but
also knowledge and experience to efficiently (or
effectively, creatively) assemble (or produce, change,
sell, move, cure, shape, etc.) products (or services,
ideas) that satisfy (or match, exceed, delight) customer
(or client’, citizens’, society’s) demands (or needs,
concerns, dreams).
 OPERATIONS IN
PRACTICE
• Read on page 10 :
MSF operations provide
medical aid to people in
danger
• Strategic objectives of not-for-
profit organizations may be
more complex and involve a
greater emphasis on political,
economic, social, or
environmental objectives
• There may be a greater
chance of operations decisions
being made under conditions
of conflicting objectives
 NEW OPERATIONS AGENDA

• Changes in the business environment have significant

impacts on the challenges faced by operations managers
• New technologies – difficult to predict their effect
• Different supply arrangements – balanced against supply
vulnerability and ethical issues
• Increase emphasis on social and environmental issues – a
greater expectation about the ethical treatment of
stakeholders (customers, workforce, suppliers, society)
Some operations
responses in these
three areas
 INPUT-TRANSFORMATION-OUTPUT
PROCESS
• All operations create and deliver services and products by
changing input into output using a transformation process
model
 INPUT-TRANSFORMATION-OUTPUT
PROCESS
• Operations take in a set of input resources to transform
something into output of services and products
• They differ in the nature of their specific inputs and outputs
• Hospital
• Deliver services that change the physiological or psychological
condition of patients
• Diagnostic, care, and therapeutic process
• Patients form part of the input and output
• Vehicle plant
• Create or deliver products
• Metal-forming machinery and assembly operations
• Steel, plastic, cloth, tires, and other materials into vehicles
 TRANSFORMED RESOURCES
Materials – to transform their physical properties (shape,
composition), to change their location (parcel delivery), to
change the procession of materials, to store materials
(warehouse)

Information – to transform their informational properties

(accountant), to change the procession (market research),
to store information (libraries, cloud storage), to change
location (telecoms companies)

Customers – to transform their physical properties

(hairdressers, surgeons), to accommodate customers
(hotels), to change location or conditions (airlines, hospitals)
 DOMINANT TRANSFORMED
RESOURCE INPUTS
Materials Information Customer
All manufacturing operations Accountants Hairdressers
Mining companies Bank headquarters Hotels
Retail operations Market research company Hospitals
Warehouses Financial analyst Mass rapid transports
Postal services News service Theaters
Container shipping lines University research unit Theme parks
Trucking companies Telecoms company Dentists
 TRANSFORMING RESOURCES

Resources that act upon the transformed resources. There

are two types.

Facilities – buildings, equipment, plant, and process

technology of the operation

Staff – people who operate, maintain, plan, and manage

the operation
 FRONT- AND BACK-OFFICE
TRANSFORMATION
• Front-office – interact with (transform) customers
• Back-office – have little or no direct contact with customers,
but perform the activities that support the front-office
OPERATIONS IN PRACTICE

• Read on
page14 – 15 :

Marina Bay
Sands Hotel
 OUTPUTS

• Operation create products and services

• Products are physical things whereas services are activities
or process
• Some services do not involve many physical products
• Some manufacturers do not give much service
• Most operations produce some mixture of products and
services
 IHIP CHARACTERISTICS

Intangibility – they Heterogeneity –

are not physical they are difficult to
The difference items standardize
between product
and service is not
always obvious Perishability – they
Inseparability – their
cannot be stored
production and
because they have
consumption are
a very short shelf
simultaneous
life
 IHIP CHARACTERISTICS

• Some operations
produce just
products
• Others produce
just services
 IHIP CHARACTERISTICS
• Intangibility – difficult to define boundary. Important to
manage customers’ expectations as to what the service
comprises
• Heterogeneity – every service is different and difficult to
standardize. Cost efficiencies become difficult and staff
must be trained to cope with a wide variety of requests.
• Inseparability – production and consumption are
simultaneous. Operations must have sufficient capacity to
meet demand.
• Perishability – output is difficult to store and ceases to have
value after a short time. Important to avoid lost revenue or
underutilized resources.
 SERVITISATION
• Operations, which once considered themselves exclusively
producers of products, are becoming more service-
conscious
• It involves firm developing the capabilities they need to
provide services and solutions that supplement their
traditional product offerings
• Ex: Rolls-Royce
• rather than selling individual engines, offered customers to
buy power-by-the-hour
• Customers buy power the aero engine delivers, Roll-Royce
provides physical engines and all of support (maintenance,
training, updates)
 OPERATIONS IN PRACTICE

• Read on page 18 :

Servitization and
circular design at
Philips lighting
 SIPOC ANALYSIS

• It is a method of formalizing a process at a relatively general

rather than a detailed level
• It stands for Suppliers, Inputs, Process, Output, and Customers
• It helps all those involved in the process to understand what it
involves and where it fits within the business
• What information should suppliers to the process provide?
• What form should the information be given?
• What are the steps in the process and who is responsible for
them?
 PROCESS HIERARCHY
• All operations consist of a collection of
processes interconnecting with each other to
form an internal network
• Each process acts as a smaller version of the
whole operation of which it forms a part
• The mechanisms that transform inputs into
outputs are these processes
• A process is an arrangement of resources and
activities that transform inputs into outputs
that satisfy (internal and external) customer
needs
 PROCESS HIERARCHY
Operation Some of operation’s processes
Airline Passenger check-in assistance, baggage drop, security/seat
check, board passengers, fly passengers and freight around the
world, flight scheduling, in-flight passenger care, transfer assistance,
baggage reclaim

Department Source merchandise, manage inventory, display products, give

store sales advice, sales, aftercare, complaint handling, delivery service

Police service Crime prevention, crime detection, information

gathering/collating, victim support, formally charging/detaining
suspects, managing custody suites, liaising with court/justice system

Ice cream Source raw materials, input quality checks, prepare ingredients,
manufacturer assemble products, pack products, fast freeze products, quality
checks, finished good inventory
 OPERATIONS MANAGEMENT
ANALYSIS
• Any business or operation can itself be viewed as part of a
greater network of business or operations
• It will have operations that supply it with the services and
products it needs
• It will supply customers who themselves may go on to supply
their customers
• This network of operations is called the supply network
• There are three levels: Process, Operation, and Supply
Network
OPERATIONS MANAGEMENT
ANALYSIS
OPERATIONS MANAGEMENT
ANALYSIS
OPERATIONS MANAGEMENT
ANALYSIS
NON-OPERATIONS FUNCTIONS
 All operations processes are similar
since they all transform inputs

They differ in four important ways,

DIFFERENCE known as fours Vs
IN (Volume, Variety, Variation, Visibility)
OPERATIONS
Degree of
visibility that
Variation in
the creation
Volume of Variety of the demand
of their
their output their output for their
output has
output
for
customers
 VOLUME DIMENSION

• Ex: Volume has important implications for the way McDonald’s

operations are organized
• Repeatability of tasks people are doing and systemization of the
work
• Standard procedures are specified for each job
• Low unit costs
• Ex: Small local cafeteria
• Volume and repetition are far lower
• Less investment in specialized equipment
• Cos is higher
 VARIETY DIMENSION

• Ex: Taxi company is high-variety service

• Pick up and drop off almost anywhere
• Drivers have good knowledge of the area
• Cost per km is high
• Ex: Bus service
• Has a few well-defined routes with a set schedule
• Little flexibility
• Standard and regular results in relatively low costs
 VARIATION DIMENSION

• Ex: Summer holiday resort hotels

• More customers stay in summer than winter
• Full capacity at the season high, but a small fraction during the
off-season
• Variation in demand leads to change in capacity such as hiring
extra staff for summer
• Higher cost in recruitment, overtime, and underutilization of rooms
 VISIBILITY DIMENSION
• Visibility means
• How much of the operation’s activities its customers experience
• How much the operation is exposed to its customers
• Customer-processing operations are more exposed to their
customers than material- or information-processing operations
• Ex: Retail could operate as a high-visibility brick-and-mortar shop
• It is difficult for high-visibility operations to keep costs down
• Ex: Web-based retailer has far lower visibility
• Shorter time lags between orders placed, retrieved, and
dispatched
• High staff utilization, centralized physical operation
OPERATIONS IN
PRACTICE HotelF1

• Read on pages 24 – 25
Two very different Ski Verbier
hospitality operations
 IMPLICATIONS OF FOUR VS OF
OPERATIONS PROCESSES
• High volume, low variety, low variation, and low customer
contact result in processing costs down
• Low volume, high variety, high variation, and high customer
contact carry processing costs penalty
• The position of an operation on four dimensions is
determined by the demands of the market it is serving
• Operations and processes can reduce their costs by
increasing volume, reducing variety, reducing variation and
reducing visibility
WORKED EXAMPLE
 OPERATIONS MANAGEMENT
ACTIVITIES
• We classify operations management activities under four
headings
• Directing the overall strategy of the operation
• Designing the operation’s services, products, and processes
• Planning and control process delivery
• Developing process performance
 OPERATIONS IN PRACTICE

• Read on page 27
Fjallraven products
are voted the most
sustainable in their
field