Operations Management Value added - difference between the cost of inputs and the

Module 1 value or price of outputs

Definition of Terms: Logistics - involves in shipping of goods to warehouses, retail
Operations Management - management of processes that outlets, or final customers
transform an organization's inputs into goods and services Standardized output - high degree of uniformity in goods or
that add value for the customer services
- GOAL is to maximize efficiency by producing products Customized output - designed for a specific case or individual
at a lower cost while being able to fulfill and satisfy System - a set of interrelated parts that must work together
customer needs Craft production - system in which highly skilled workers use
- deals with creation and management of goods and simple, flexible tools to produce small quantities of
services customized goods
Mass production - system in which lower-skilled workers use
Operations - function in an organization that is responsible for specialized machinery to produce high volumes of
creating goods and/or services standardized goods
Interchangeable parts - parts of a product made to such
Goods - tangible items produced by the organization precision that they do not have to be custom fitted.
- production may occur in the factory or elsewhere, like Frank Gilbreth - industrial engineer often referred to as father
farms, restaurants, etc. of motion study . Developed motion economy
Henry Gantt - Recognized the value of non monetary rewards
Services - activities that they render to the customers to motivate workers. developed system for scheduling
- deals with performance of an act Gantt Chart - a system for scheduling developed by Henry
- involve elements of time, location, form or Gantt
psychological value that organizations perform Harrington Emerson - encouraged the use of organizational
- professional services of doctors, lawyers, professors, efficiency
repair services etc. Henry Ford - Great industrialist and employed scientific
- has variability and quality assurance is more difficult management techniques in his factories
Manufacturing - produces a tangible output, in the form of a
good
 - where inputs and outputs are standard or has more Mission Statement - statement defining the
control of both their inputs and desired output purpose/destination of an organization's existence
- PATENTS are more applicable here - discusses the present business of the organization and
serves as a basis for its goals and strategies
Supply Chain - sequence of how the organization produces
and delivers products and services DLSL Mission-Vision Statement
- involves the facilities, functions and all activities related Inspired by our faith in God, by our Catholic traditions, and
to sourcing the raw materials until the products and by the charism of St. John Baptist de La Salle, educational
services reach the final customers innovator par excellence, we, together and by association, are
- necessary in determining how one problem in one link committed to giving quality human and Christian education to
could disrupt or affect the flow of the next one in the all, building a society founded on equity and justice and on
chain sustainable and inclusive development

Core Competencies - attributes that give an organization a

competitive edge
Economies of Scale - phenomenon where the average costs
per unit of output decrease with the increase in the scale or
magnitude of the output being produced by a firm
- able to increase production while lowering operating
costs

❖ Scope & Nature of Operations Management

production of goods and delivery of services differ in
terms of:

➢ customer contact - service (H), goods (L)

Strategy - An organization’s action plan to achieve the mission
➢ input and output variability - service (H), goods
- steps to achieve mission
(L)
 ➢ quality assurance - service (L), goods (H) - In the model, inputs (capital, labor, information, etc.)
➢ productivity - service (L), goods (H) are transformed through different processes in order
➢ inventory - service (L), goods (H) to create outputs (goods or services) that provide value
to customers (value-added). Measurements (feedback)
are likewise taken at various points of the process and
❖ Importance of Operations Management are compared to standards to determine necessary
- decisions in organizations are cross-functional thus corrective action (control).
understanding operations is necessary even if you
work in other functions

❖ Responsibilities and Skills of an Operations Manager

❖ Three (3) major functional areas of operations and how
they relate
-
1. Operations - producing goods and/or delivering the
services; CORE of organization
❖ Historical Development of Operations Management
2. Finance - allocating the resources of the
(Stevenson, 2018)
organization and securing their financial resources
1. Industrial Revolution (1770s)
3. Marketing - assessing the needs and wants of the
- PRE-INDUSTRIAL: craftsmen and their
consumers and in selling and promoting the
apprentices produced goods; no machines yet
organization’s goods and services
so rely on simple tools and skills, production
was slow and costly
(Other functions such as Human Resources, Information
- INDUSTRIAL : labor being slowly replaced by
Systems, Research & Development, Sourcing & Logistics,
machines; invention of steam engine; source of
Accounting, etc.)
power for factories; wooden to iron machines;
standard gauging system (non-customizing)
❖ Stage of Transformation Process (Input/Output
- lacks progressive management theory and
Transformation Model)
practice
2. Scientific Management : X- workers need to be
- Frederick Winslow Taylor: father of scientific controlled bc they don’t like their work; Y-
management; improved work methods by workers are committed
identifying how work is done and the best way
of doing the job 4. Decision Models and Management Science
: selection and training - Quantitative tools: use of mathematical models
of workers and statistics
- Frank Gilbreth: father of motion study (dividing - World War II: use of statistical sampling for
work into small tasks) military tactics and production output
- Henry Gantt: Gantt charts (systematical
scheduling of work) 5. The Influence of Japanese Manufacturers
- Harrington Emerson: organizational efficiency - W. Edwards Deming and Joseph Juran:
- Henry Ford: mass production (producing LARGE American citizens worked on Japan for National
volumes of standardized goods by Consensus
LOW-SKILLED workers thru specialized : taught Statistical Quality Control
equipment which spurred quality revolution
: scientific management techniques
in producing cars ❖ Trends and Challenges Facing Operations
: division of labor Management
1. Economic Conditions
3. Human Relations Movement - e.g. covid crisis affecting tourism industry,
- considered the importance of human in the airline operations, hotel & restaurant
process - results in strategic planning for the survival of
- Frank and Lilian Gilbreth: analyzing fatigue their business and their future as well
experience 2. Intense Competition
- Elton Mayo: motivation among workers to - due to this, operations managers aim to
improve productivity (Hawthorne studies) provide the best products and services in order
- Douglas McGregor: Theory X and Y
 to satisfy their customers and have a 5. Ethical Issues - being ethically responsible positively
competitive edge affects how the general public sees them
- cutting cost: outsourcing their products or - they do not have to spend generously
inputs from a third party, locating to an area on other advertisements and promotions, word-of-mouth
with a low labor costs, improving product and (WOM) would encourage repeat business
service designs and increasing their
productivity 6. Cyber Security - threats on businesses: hacking,
- DIFFERENTIATING themselves from the phishing
competition - assure the confidentiality and
privacy of their customers so that customers would not
3. Technology / Innovations choose to do business elsewhere
- finding new ways of improving their products - e.g. banking
and services in order to create more value for Module 2
their customers
- e.g. launching of Iphone 12 and Iphone 12 Pro ❖ Operations Strategy vs. Organization Strategy
because of the major updates Operations strategy - defining the role and activities of
operations function in the organization
4. Environmental Concerns - increasing awareness on - Focuses on the capabilities that enable the firm
the impact of pollution and environmental degradation to gain competitive advantage
of businesses - A well-thought-of strategy is useless if not
- strict environmental compliance, sustainability, implemented
reducing carbon footprint and environmental 1. Defining Mission - destination of organization
waste 2. Establishing Strategies (Three Basic Business
- e.g. pursuing eco-friendly packaging and Strategies)
materials, limiting their use of plastic and other - low cost (offering product at a lower price thru
non-biodegradable inputs, encouraging their locating a place w/ low labor cost and achieving economies of
employees to practice the 3Rs scale)
 - differentiation (product or service features, Order Winners - characteristics of an organization's
quality, reputation, or customer service) output that are perceived by customers to be better than their
- responsiveness (how quick and flexible the counterparts
organization responds to the needs or the demands of their Order Qualifiers - refer to characteristics that
customers) customers perceive as minimum standards before they
consider one product for purchase
❖ Strategies Formulation of An Organization Quality-based strategies - focus on improving the
Competitiveness - refers to how effective an quality of an organization's output
organization is in terms of meeting the needs and wants of Time-based strategies - want to reduce time in terms of
other companies that offer similar output introducing innovations or responding to customer demand

❖ Reasons Behind Failure of Organizations ❖ Productivity of Organizations

“Organizations have to understand the different reasons why - productivity is difficult to measure in service unlike in
organizations fail so they can avoid the same fate.” manufacturing where you could easily compute for
Causes of Business Failure productivity by dividing outputs over inputs
1. only focus on making plans, but does poorly - It is well to be up before daybreak, for such habits
when it comes to execution contribute to health, wealth and wisdom. (Aristotle)
2. Doesn’t do environmental scanning - Productivity: means making efficient use of your
3. doesn’t have long-term and short-term plans resources, which is in your case, your time and energy
4. Poor management of operations (issues on : refers the effective use of their resource,
providing adequate inventory, missing or the ratio of output to input
deadlines and operations schedule, and : can be computed based on a single input
neglecting human resources) (partial productivity), on more than one input (multifactor
Environmental Scanning - SWOT Analysis productivity), or on all inputs (total productivity)
- strengths and weakness (internal),
opportunities and threats (external) Productivity = 𝑜𝑢𝑡𝑝𝑢𝑡/ 𝑖𝑛𝑝𝑢𝑡
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 − 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
Productivity Growth = 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
𝑥 100
Factors Affecting Productivity:
1. Manpower
2. Management
3. Methods
4. Capital
5. Quality
6. Technology
Business Compete Using Marketing:
1. Identifying customer wants and needs
2. Pricing
3. Advertising and Promotion
Business Compete Using Operations: MPCLQ^2 FIS^2
1. Manager and workers
2. Cost
3. Product and Service Design
4. Location
5. Quality
6. Quick Response
7. Flexibility
8. Inventory management
9. Supply Chain Management
10. Service