1. Production & Operation Management

2. The Field of Operation Management
Chapter #1

3. Production Vs Operation
The term Production is used mainly for organizations that are involved in manufacturing of goods, such as automobiles, electronics, garments or foot wear etc.
Also called manufacturing process.
The term Operations is used for organizations that provide service to others e.g. FedEx delivers 5.5 million packages each day with sales of $26 billion each year.
Also called service process.

4. Operations Management
Operation Management deals with processes.
What is a Process?
Any activity or group of activities that takes one or more inputs, transforms them and provides one or more outputs for its customers.

5. What is a Process (cont’d….)
Fundamental activities that organizations use to produce goods and to provide services and achieve goals.
E.g. FedEx must receive packages from customers, sort them by destiny, move them to the required destination by air or ground transportation, keep track of their progress and bill the customer for the service.

6. The Process View External environment Internal and external customers
Processes and operations 1 2 3 4 5
Inputs
Workers
Managers
Equipment
Facilities
Materials
Land
Energy
Outputs
Goods
Services
Information on performance
Figure 1.1

7. The Process View
Process is much broader then the boundaries of departments within an organization.
A single process may involve work flow that spread across many departments. E.g. at Serena hotels various departments and activities coordinate to serve their guests such as, reservation, Reception, baggage collection, room services, food & beverages, House keeping, laundry, restaurants and billing & accounts department etc.
Effectiveness of any organizations is actually due to the effectiveness of its processes.

8. Nested Processes
Planning and controlling for processes of any service or manufacturing firm is very complicated, as a single process may consist of many different activities or actions performed by various department or person.
A single process may be broken down into sub processes which can be broken down into further.
The concept of a process within a process is called NESTED PROCESS.

9. Service Vs Manufacturing Processes
Service process
Physical, durable output
Output can be inventoried
Low customer contact
Long response time
Capital intensive
Quality easily measured
Intangible, perishable output
Output cannot be inventoried
High customer contact
Short response time
Labor intensive
Quality not easily measured
Figure 1.2

10. Process across the organization
Finance
Acquires financial resources and capital for inputs
Marketing
Generates sales of outputs
Operations
Translates materials and service into outputs
Support Functions
Accounting
Information Systems
Human Resources
Engineering
Material & Service Inputs
Sales Revenue
Product & Service Outputs
Figure 1.3

11. Operations Management
The systematic design, direction, and control of processes that transform inputs into useful services & products for internal, as well as external customers.

12. Operations Management
Activities that relate to the creation of goods and services through the transformation of inputs into outputs.
The field of OM is multidimensional constantly changing.

13. Scope of Operations Management
Planning for operations
Product & Service Design
Quality
Inventory
Cost
Facility Location
Facility Layout
Materials
Production Planning
Forecasting
Material Planning
Scheduling
Supply Chain Management
Technology
Planning for Manpower

14. Operation Management Processes as Value chain
Processes can be linked together to form a value chain – interrelated processes within a firms and across different departments that produce a service or product to the satisfaction of the customers.

15. Value Chain View Core Processes Support Processes External suppliers
External customers
Inbound Logistics
operations
Outbound logistics
Marketing,
Sales and Services
Core Processes
Figure 1.4

16. Value Chain Core processes & Support processes
Core processes are sets of activities that deliver value to external customers
Inbound Logistics
Operations
Outbound Logistics
Marketing/Sales & Services
Support processes provide vital resources and support to the core processes

17. Support Processes TABLE 1.1 | EXAMPLES OF SUPPORT PROCESSES
Capital acquisition
The provision of financial resources for the organization to do its work and to execute its strategy
Budgeting
The process of deciding how funds will be allocated over a period of time
Recruitment and hiring
The acquisition of people to do the work of the organization
Evaluation and compensation
The assessment and payment of people for the work and value they provide to the company
Human resource support and development
The preparation of people for their current jobs and future skills and knowledge needs
Regulatory compliance
The processes that ensure that the company is meeting all laws and legal obligations
Information systems
The movement and processing of data and information to expedite business operations and decisions
Corporate and functional management
The systems and activities that provide strategic direction and ensure effective execution of the work of the business

18. Nokia Value Chain

19. Customer Supplier relationship
Internal &external Supplier
Internal Supplier
The employees or processes that supply important information or materials to a firm’s processes.
External Supplier
The businesses or individuals who provide the resources, services, products and materials for the firm’s needs.
Internal & External Customer
Internal customer
One or more employees that rely on inputs from other employees in order to perform their work
External customer
A customer who is either an end user or a business user, buying the firm’s products and services.

20. Historical Development of Operation Management
The modern OM has gone through a long evolution process over more than a century and has taken the shape of how we know it today.
Here are some important milestones and developments in the field of OM over the years.

21. Historical Development of OM
Early 1900s – 1940s:
The era of industrial revolution and inventions. Focus was on identifying ways to produce on a large scale at minimum cost. Focus on Quality control and mass inspection was an important development in 1930s.
Most important concepts of this era are:
Scientific Management by Fredrick Taylor
Time and Motion study
Activity scheduling chart (GANTT Chart)
Quality Control by using inspection statistical product control
Hawthorne studies of worker motivation

22. Late 1950s – early 1960s:
The specific concept of operations management was introduced. Scholars identified the commonalities of all production systems and emphasized the important of viewing production operations as a system.
Most important concepts of this era are:
PERT Chart
Decision Theory
Critical path method (CPM)
Mathematical Programming models

23. 1970s:
Introduction of computer technology in business operations. Proves to be a new revolution in OM.
Most important concepts of this era are:
Forecasting
Scheduling techniques
Inventory Control
Project Management
Service Quality & productivity

24. 1980s:
This era marks the development of manufacturing strategy paradigm by the researcher of Harvard Business School. Use of sophisticated computer technology for manufacturing and operations.
Just in Time philosophy
Factory Automation
Robots (CIM)
CAD/CAM

25. 1990s:
Major development of this era is TQM. Development of industry standards for quality ISO 9000 certification standards created by International Organization for Standardization.
TQM
Process Re-engineering
Supply Chain Management
Electronic enterprise (Internet)
SAP/Oracle software
2000s:
Enterprise Resource Planning (ERP)
E-commerce