1. Operation Management

2. Definition of 'Operations
Management'
• Operations management refers to the
administration of business practices to create the
highest level of efficiency possible within an
organization. Operations management is
concerned with converting materials and labor
into goods and services as efficiently as possible
to maximize the profit of an organization.

3. Production and Operations

4. Operations Management
• Operation system is either manufacturing sector
or service sector. The input requirements and the
transformation process, in which part of the
value addition takes place to get the required
quantity of the product or services with the
targeted quality within the specified time
period, is carried out in a most economical way.
Operation Management Plan coordinates and
controls all the activities in the operation system
to achieve the stated objectives.

5. • The operation system includes both
manufacturing sector as well as service
sector, but when you use the word PM, you
should be careful to note that it refers to the
manufacturing sector but not the service
sector. Suppose, you are designing a layout for
the hospital you should say that you are
applying Operations Management Technique
not the Production Management Technique.

6. Nature / Scope / Introduction :
• Know the production & operation function as process
of value addition.
• Recognize the distinction between product & services.
• Understand all organizations as conversion system whe
ther in manufacturing or service sectors.
• Identify problems of decision making in operations
management.
• Distinguish functions & requirements of different
departments.
• Facilities required for production & operation.

7. Production and operation function
• Creation
• Customer Service
• Profit(produce a product or service that creates profit and revenue
for the company)
• Evaluation(self-evaluating entity that monitors the
quality, quantity, and cost of goods produced)
• Tasks(include
forecasting, scheduling, purchasing, design, maintenance, people
management, flow analysis, reporting, assembly and testing)
• Fulfilment

8. Specifying the production function
• A production function can be expressed in a
functional form as the right side of
Q= f (X1,X2,X3,…..Xn)
where:
Q=quantity of output
X1,X2,X3,…..Xn=quantities of factor inputs (such
as capital, labour, land or raw materials).

9. STRATEGIC IMPORTANCE OF THE
PRODUCTION FUNCTION
• Effective production and operations
management can:
• Lower a firm’s costs of production.
• Boost the quality of its goods and services.
• Allow it to respond dependably to customer
demands.
• Enable it to renew itself by providing new
products.

10. Top-down Approach to OM Strategy
Operations Strategy Decisions
Strategic (long-range)
Needs of customers
(capacity planning)
Tactical (medium-range)
Efficient scheduling of
resources
Operational planning
and control (short-range)
Immediate tasks and
activities

11. Mass Production
• A system for manufacturing products in large amounts through
effective combinations of employees with specialized
skills, mechanization, and standardization.
• Assembly line Manufacturing technique that carries the product on a
conveyor system past several workstations where workers perform
specialized tasks.
• Applied by Henry Ford to improve the efficiency of automobile
manufacturing.
• Before assembly line, produced one car per worker per 12-hour
workday.
• After assembly line, produced eight cars per worker per 12-hour
workday.
• Efficient method for making mass quantities of similar items.
• Not flexible.

12. • Flexible Production
• Produces smaller batches of goods cost-effectively with
information technology.
• Information technology to share the details of customer orders.
• Programmable equipment to fulfill the orders.
• Skilled people to carry out whatever tasks are needed to fill a
particular order.
• Customer-Driven Production
• Evaluates customer demands to link what a manufacturer
makes with what customers want to buy.
• Link computers in factories to retail scanners to create short-
term forecasts and design production schedules.
• Make product only after customer orders it.
• Example: Dell

13. PRODUCTION PROCESSES
• Synthetic production system Combines a number of
raw materials or parts or transforms raw materials to
produce finished products.
• Example: Dell’s assembly line
• Continuous production process Generates finished
products over a lengthy period of time.
• Example: Steel industry
• Intermittent production process Generates products in
short production runs, shutting down machines
frequently or changing their configurations to produce
different products.
• Example: Most services

14. THE JOB OF PRODUCTION MANAGERS
• Oversee the work of people and machinery to convert
inputs (materials and resources) into finished goods and
services.
• Four main tasks:

15. Planning the Production Process
• Begins by choosing what goods or services
to offer customers.
• Convert original product ideas into final
specifications.
• Design the most efficient facilities to
produce those products.

16. Implementing the Production
Plan
• Make, Buy, or Lease Decision
• Choosing whether to manufacture a needed
product or component in house, purchase it from
an outside supplier, or lease it.
• Factors in the decision include cost, availability of
reliable outside suppliers, and the need for
confidentiality.
• Selection of Suppliers
• Based on comparison of
quality, prices, dependability of delivery, and
services offered by competing companies.

17. • Inventory Control
• • Perpetual inventory Systems continuously monitor
the amounts and locations of stocks.
• Just-in-Time Systems
• • Management philosophy aimed at improving profits
and return on investment by minimizing costs and
eliminating waste through cut- ting inventory on hand.
• Materials Requirement Planning
• • Computer-based production planning system by
which a firm can ensure that it has needed parts and
materials available at the right time and place in the
correct amounts.

18. Controlling the Production
Process
• • Production control Creates a well-defined set
of procedures for coordinating
people, materials, and machinery to provide
maximum production efficiency.
• Production Planning
• • Determining the amount of resources (including
raw materials and other components) an
organization needs to produce a certain output.
• Routing
• • Determining the sequence of work throughout
the facility and specifying who will perform each
aspect of the work at what location.

19. OM’s Contributions to Society
• Higher Standard of Living
–Ability to increase productivity
–Lower cost of goods and services
• Better Quality Goods and Services
–Competition increases quality
• Improved Working Conditions
–Better job design and employee participation

20. Application of OM to Service
Operations
–Batch cooking operations at McDonald’s
–Just-in-Time (JIT) at Northern Telecomm, Inc.
–Automatic inventory replenishment at Wal-Mart

21. An Expanded Definition of Quality
• Quality is important in all functional areas of
an organization.
• Quality is now much more than the technical
requirements for manufactured goods.
• Service quality (customer relationships)
is equally important.
Quality

22. Linking OM to Customers and
Suppliers
• Benefits of Buffering the Transformation Process
– The process was often more efficient than input and
distribution processes.
– Productivity was maximized when processes operated at
continuous rates.
– Process management skills were different from those of
other functional activities.
• Disadvantages of Buffering the Transformation Process
– Information lag in interaction with other functional
activities.
– Lack of communication between customers and the shop
floor for problem solving.