Operations Management

Chapter 1

Operations management
 Key operations questions

What is operations management?

Why is operations management important in all
types of organisation?
What is the inputtransformationoutput process?
What is the process hierarchy?
How do operations processes have different
characteristics?
Operations management
Operations management is the activity of
managing the resources which are devoted
to the production and delivery of products
and services.
Operations

Organisation/
Enterprise

Product/
Service Marketing
developme and Sales
nt

Core functions of any organisation

Prt a Manger

High-end sandwich and snack retailer

Use only wholesome ingredients

All shops have their own kitchens where fresh sandwiches
are prepared every day
Fresh ingredients are delivered early every morning

Same staff who serve you at lunch made the sandwiches

that morning
We dont work nights, we wear jeans, we party
 The three basic functions at
OrganisationNutritional mechanical
and aesthetic design of
the sandwiches and
snacks
Product/
Service
development

Design, location
and management
Marketing Operations of stores and in-
store processes
Promotional and the network
activities, that supplies them
market
research, etc.
Three basic functions at enterprise
Product /
Service
Development Digital Stock

Marketing Operations
Pearson
Education Ltd.
Lord and Ford Motor
Leverett Company
Inter-functional relationships between operations
and other functions

Engineering/ Product/service
technical Understanding of
the capabilities and development
function constraints of the function
operations process
Analysis of new
technology options Understanding of
process technology
needs New product and
Accounting service ideas
and finance Provision Understanding of the
of relevant capabilities and
function data
Operations constraints of the
Financial analysis function operations process
for performance
and decisions Market
requirements Marketing
Understanding of
Understanding Provision of systems for
function
human resource needs
of infrastructural design, planning and
Recruitment and system control, and improvement
development needs
and training
Human Information
resources technology
function (IT) function
Operations management is fashionable!

The consultancy services market % of world

revenues of 40 largest consultancy firms

Financial Marketing/sales
6 2
Organizational
design
Operations and process
11
management
31
Benefits/Actuarial
16

IT strategy Corporate strategy

17 17
 The best way to start understanding the nature
of Operations is to look around you.
Everything you can see around you (except the
flesh and blood) has been produced by an
operation.
Every service you consumed today (radio
station, bus service, mobile phone, restaurant)
lecture, etc.) has also been produced by an
operation.
Operations Managers create everything you buy,
sit on, wear, eat, and throw away.
Operations management in all types of organisation
Automobile assembly factory Operations
management uses machines to efficiently
assemble products that satisfy current
customer demands
 Operations management in all types of organisation (contd)

Physician (General practitioner)

Operations management uses
knowledge to effectively diagnose
conditions in order to treat real
and perceived patient concerns
Operations management in all types of organisation (contd)

Management consultant Operations

management uses people to effectively
create the services that will address
current and potential client needs
Operations management in all types of organisation (contd)

Disaster relief
charity Operations
management uses
ours and our partners
resources to speedily
provide the supplies
and services that
relieve community
suffering
 Operations management in all types of organisation (contd)

Advertising agency Operations

management uses staffs knowledge
and experience to creatively present
ideas that delight clients and address
their real needs
 Operations management uses
machines to efficiently assemble products

diagnose to treat real and

knowledge to effectively perceived patient
conditions
concerns

people to effectively create services that will

address current and
potential client
needs

ours and our to speedily provide supplies and

partners services that relieve
resources community suffering

to creatively present ideas that delight

our staffs
clients and address
knowledge and
their real needs
experience
Think of operations

Group activity (in groups of 3):

1. Come up with your own definition of

Operations Management

2. Identify three other organisations using

Operations Management

3. Identify all possible functions associated with

the identified operations
 Operations management at IKEA
Design a store layout
Design elegant which gives smooth Ensure that the jobs
products which can be and effective flow of all staff encourage
flat-packed efficiently their contribution to
business success

Site stores of an Continually examine

appropriate size in and improve
the most effective operations practice
locations

Maintain
cleanliness and Monitor and enhance
safety of storage Arrange for fast quality of service to
area replenishment of customers
products

http://www.youtube.com/watch?v=2XDxh
RaOVB8
 Operations Management

2. Operations Strategy
3. Social, environmental Direct
and economic
performance 12. Quality management
13. Operational
improvement

Operations
management Develop
Design

4. The design of 7. Supply network

services and products management
5. Process Design 8, 9. Capacity and
Deliver
6. Location, layout and Inventory mgmt.
flow 10. Planning and control
11. Lean Synchronization
 Slack et al.s model of operations management

Operations
Transformed performance
resources
Materials Direct Operations
Informatio strategy
n
Customer Operations
s management Output
Input Design Improvement
resources products and Customers
services
Planning and
Transforming control
resources
Facilities
Staff
 Operations input resources and outputs

Transformed
resources
Materials
Informatio
n
Customers
Input Output
resources
Transformation process products and Customers
services

Transforming
resources
Facilities
Staff Outputs are products and services
that add value for customers
 Inputs and outputs at Prt a Manger

Transformed
resources
Ingredient
s
Packaging
Customer
s
Input Served and
resources satisfied Customers
customers

Transforming
resources
Equipment
Fittings
Staff
 Operations management is changing
The business environment is
changing, for example:
Increased cost-based competition
Higher quality expectations
Demands for better service
More choice and variety
Rapidly developing technologies
Frequent new product/service
introduction
Increased ethical sensitivity
Environmental impacts are more
transparent
More legal regulation
Greater security awareness
Prompting operations responses, for
example:
Globalisation of operations networking
Information-based technologies
Internet-based integration of operations
activities
Supply chain management
Customer relationship management
Flexible working patterns
Mass customization
Fast time-to-market methods
Lean process design
Environmentally sensitive design
Supplier partnership and development
Failure analysis
Business recovery planning
Most operations produce products and services
Pure products
Crude oil production
Outputs that are
Acme Whistles exclusively tangible
Aluminium smelting

Specialist machine tool

production Mixture of products and
Pret a Manger services Outputs that
Restaurant are a mixture of the
tangible and intangible
IKEA
Information systems
provider

Management consultancy
Pure services
Mwagusi Safari
Outputs that are
Psychotherapy clinic Lodge
exclusively intangible
Operations can be analysed at three levels

Flow between operations

The level of the supply network

Flow between processes

The level of the operation

The level of the process

Flow between resources
Example of analysis at three levels
The supply network Flow between operations

Engines Cockpit
systems Aircraft
Metal Aircraft
provider company supply network
Aircraft
Systems
Electronic
s

The operation Flow between processes

The
Wheel programme of
Assembly assembly
Wings Testing Certification
operation operation
Passenger
section
Example of analysis at three levels (contd)
The Operations Flow between processes

Passenger
section

The process Flow between resources

Seat
alignt.

Electrical Window Decoration Quality

wiring fitting checks

Floor
adjustments
Example of analysis at three levels
The supply network Flow between operations

Studios Promotion A programme

agency
and video
Casting Broadcasting supply network
agency company
Programme/
video
Creative maker
agency

The operation Flow between processes

The
programme
and video
operation
Example of analysis at three levels (contd)
The supply network Flow between operations

Programme
and video
maker

The operation Flow between processes

Engineer
-ing

Marketing Finance and Production Post

and sales accounting unit production

Set and props

manufacture

The programme and video operation

 Example of analysis at three levels (contd)
The supply network Flow between operations

Programme
and video
maker

The operation Flow between processes

Set and props

manufacture

The Process Flow between resources

The Set and Set

construction
props Set Set
manufacturing design Props finishing
process acquisition
Level of operations, processes and resources
Supply Level (Flow between Operations)

Operations level (Flow between processes)

Process level (Flow between resources)

Differences within sectors are often greater than the
differences between sectors

Financial services
An account Financial analyst
management centre at advising a client at an
a large retail bank investment bankPearson Education Ltd. MindStudio

Furniture manufacturing

Mass production of Craft production of

kitchen units reproduction
antique furniturePearson Education Ltd. Rob Judges

Hotels

Value-for-money Lobby of an
hotel international
luxury hotel
Photodisc. Life File. Emma Lee Photodisc. Photolink. Jack Star
A typology of operations and processes

The 4 Vs

Low Volume High

High

High Variety Low

High Variation in demand Low

High Visibility Low

 A typology of operations and processes (contd)

The implications of high and low Volume in operations and

processes
Implications Implications

Low repetition
Each staff member Low Volume High High
performs more of repeatability
each task Specialisation
Less systemisation Capital
High unit costs intensive
Low unit costs
A typology of operations and processes (contd)

The implications of high and low Variety in operations and

processes
Implications Implications

Flexible Well defined

Complex High Variety High
Low Routine
Match Standardised
customer Regular
needs Low unit costs
High unit
costs
 A typology of operations and processes (contd)

The implications of high and low Variation in operations and

processes
Implications Implications

Changing Variation in Stable

capacity High High
Low
demand Routine
Anticipation
Predictable
Flexibility
High
In touch with utilisation
demand Low unit costs
High unit
costs
 A typology of operations and processes (contd)

The implications of high and low Visibility in operations and

processes
Implications Implications

Short waiting Time lag

tolerance High Visibility High
Low between
Satisfaction production and
governed by consumption
customer Standardisatio
perception n
Customer Low contact
contact skills skills
needed High staff
Received variety utilization
is high Centralisation
High unit costs Low unit costs
A 4 Vs profile of two operations

Low Volume High

High Variety Low

High Variation Low

High Visibility Low

Mwagusi Formule 1
Safari Lodge Hotel
Important to understand how different operations are
positioned on the 4 Vs.
Is their position where they want to be?
Do they understand the strategic implications?
Exam Hint

Why is operations management important in all

types of organisation?

What is the inputtransformationoutput

process in Operations?

Explain different characteristics (4 Vs) of

Operations