INTRODUCTION TO OPERATIONS MANAGEMENT

Operations is what businesses do. Operations is that part of a business organization that is
responsible for producing goods and or services. Operations take place in every business
organization.
 Goods - Physical items produced by business organizations.
 Services - Activities that provide some combination of time, location, form, and
psychological value

What is Operations Management?

 Set of activities that creates goods and services by transforming inputs into outputs
involving planning, coordination, and executing of all activities.
 The management of systems or processes that create goods and/or provide services.
 The design operation and movement of the production systems that creates the
firm’s primary product or service.

The ideal situation for a business organization is to achieve an economic match of supply
and demand. Having excess supply or excess capacity is wasteful and costly; having too little
means lost opportunity and possible customer dissatisfaction.
The key functions on the supply side are:
 Operations
 supply chains,
The key functions on the demand side are
 sales
 marketing
While the operations function is responsible for producing products and/or delivering
services, it needs the support and input from other areas of the organization. Every business
organizations have three basic functional areas:

Organization

Finance Operations Marketing

 Finance is responsible for securing financial resources at favorable prices and

allocating those resources throughout the organization, as well as budgeting,
analyzing investment proposals, and providing funds for operations.
 Marketing is responsible for assessing consumer wants and needs, and selling and
promoting the organization's goods or services.
  Operations is responsible for producing the goods or providing the services offered
by the organization.
“To put this into perspective, if a business organization were a car, operations would
be its engine. And just as the engine is the core of what a car does, in a business
organization, operation is the core of what the organization does.”

Hence Operations management is the management of systems or processes that create

goods and/or provide services.

Supply Chain
Operations and supply chains are intrinsically linked, and no business organization could
exist without both. A supply chain is the sequence of organizations- their facilities, functions,
and activities--that are involved in producing and delivering a product or service. The
sequence begins with basic suppliers of raw materials and extends all the way to the final
customer.

Facilities might include warehouses, factories, processing centers, offices, distribution

centers, and retail outlets. Functions and activities include fore- casting, purchasing,
inventory management, information management, quality assurance, scheduling,
production, distribution, delivery, and customer service. One way to think of a supply chain
is that it is like a chain, as its name implies.
The creation of goods or services involves transforming or converting inputs into outputs.
Various inputs such as capital, labor, and information are used to create goods or services
using one or more transformation processes (e.g., storing, transporting, repairing). To
ensure that the desired outputs are obtained, an organization takes measurements at
various points in the transformation process (feedback) and then compares them with
previously established standards to determine whether corrective action is needed (control).

The essence of the operations function is to add value during the transformation process:
Value-added is the term used to describe the difference between the cost of inputs and the
value or price of outputs.

WHY LEARN ABOUT OPERATIONS MANAGEMENT?

Whether operations management is your major or not, the skill set you gain studying
operations management will serve you well in your career. There are many career-related
reasons for wanting to learn about operations management, affects or is affected by
operations. Operations and sales are the two line functions in a business organization. All
other functions- accounting, finance, marketing, IT, and so on- support the two line
functions.

Among the service jobs that are closely related to operations are financial services e.g, stock
market analyst, broker, investment banker, and loan officer), marketing services (e,g., market
analyst, marketing researcher, advertising manager, and product manager), accounting
services (e.g., corporate accountant, public accountant, and budget analyst), and
information services (e.g., corporate intelligence, library services, management information
systems design services). A common complaint from employers is that college graduates
come to them very focused, when employers would prefer them to have more of a general
knowledge of how business organizations operate.

Apart from the career-related reasons is a not so obvious one: Through learning about
operations and supply chains, you will have a much better understanding of the world you
live in, the global dependencies of companies and nations, some of the reasons that
companies succeed or fail, and the importance of working with others.

Working together successfully means that all members of the organization understand not
only their own role, but they also understand the roles of others. In practice, there is
significant interfacing and collaboration among the various functional areas, involving
exchange of information and cooperative decision making.

For example, although the three primary

functions in business organizations perform
Operations
different activities, many of their decisions
impact the other areas of the organization.

Finance and operations management Finance

Marketing
personnel cooperate by exchanging and Sales
information and expertise in such activities as
the following:

1. Budgeting. Budgets must be periodically prepared to plan financial requirements.

Budgets must sometimes be adjusted, and performance relative to a budget must be
evaluated.
2. Economic analysis of investment proposals. Evaluation of alternative investments in
plant and equipment requires inputs from both operations and finance people.
3. Provision of funds. The necessary funding of operations and the amount and timing
of funding can be important and even critical when funds are tight. Careful planning
can help avoid cash-flow problems.

Marketing's focus is on selling and/or promoting the goods or services of an organization.

Marketing is also responsible for assessing customer wants and needs, and for
communicating those to operations people (short term) and to design people (long term).
That is, operations needs information about demand over the short to intermediate term so
that it can plan accordingly (e.g., purchase materials or schedule work), while design people
need information that relates to improving current products and services and designing new
ones. Marketing, design, and production must work closely together to successfully
implement design changes and to develop and produce new products. Marketing can
provide valuable insight on what competitors are doing. Marketing also can supply
information on consumer preferences so that design will know the kinds of products and
features needed; operations can supply information about capacities and judge the
manufacturability of designs. Operations will also have advance warning if new equipment
or skills will be needed for new products or services. Finance people should be included in
these exchanges in order to provide information on what funds might be available (short
term) and to learn what funds might be needed for new products or services (intermediate
to long term). One important piece of information marketing needs from operations is the
manufacturing or service lead time in order to give customers realistic estimates of how
long it will take to fill their orders.

Thus, marketing, operations, and finance must interface on product and process
design, forecasting, setting realistic schedules, quality and quantity decisions, and keeping
each other informed on the other's strengths and weaknesses.

People in every area of business need to appreciate the importance of managing and
coordinating operations decisions that affect the supply chain and the matching of supply
and demand, and how those decisions impact other functions in an organization.

Operations also interacts with other functional areas of the organization such as:

Public
relations

Personnel /
Legal Human
Resources

Operations

Management
Accounting Information
System (MIS)

 Legal department must be consulted on contracts with employees, customers,

suppliers, and transporters, as well as on liability and environmental issues.
 Accounting supplies information to management on costs of labor, materials,
and over- head, and may provide reports on items such as scrap, downtime,
and inventories.
  Management information systems (MIS) is concerned with providing
management with the information it needs to effectively manage. This occurs
mainly through designing systems to capture relevant information and
designing reports. MIS is also important for managing one control and
decision-making tools used in operations management.
 Personnel or human resources department is concerned with recruitment and
training of personnel, labor relations, contract negotiations, wage and salary
administration, assisting in manpower projections, and ensuring the health
and safety of employees.
 Public relations is responsible for building and maintaining a positive public
image of the organization. Good public relations provides many potential
benefits. An obvious one is in the marketplace.

Career Opportunities
There are many career opportunities in the operations management and supply chain fields.
Among the numerous job titles are operations manager, production analyst, production
man- ager, inventory manager, purchasing manager, schedule coordinator, distribution
manager, supply chain manager, quality analyst, and quality manager, office manager, store
manager, and service manager.

People who work in the operations field should have a skill set that includes both people
skills and knowledge skills. People skills include political awareness; mentoring ability; and
collaboration, negotiation, and communication skills. Knowledge skills, necessary for
credibility and good decision making, include product and/or service knowledge, process
knowledge, industry and global knowledge, financial and accounting skills, and project
management.
Production Supervisor Supply Chain Manager Social Media Product Manager
 Manage a production staff  Have a general knowledge  Identify ways to increase
of 10-20. of materials management, consumer engagement.
 Ensure the department information systems, and  Analyze the key
meets daily goals through basic statistics. performance indicators
the management of  Direct, monitor, evaluate, and recommend
productivity. and motivate employee improvements.
 Enforce safety policies. performance.  Lead cross-functional
 Coordinate work between  Be knowledgeable about teams to define product
departments. shipping regulations. specifications.
 Have strong problem-  Manage budgetary  Collaborate with design
solving skills, and strong accounts and technical to create key
written and oral  Manage projects. product improvements.
communication skills.  Develop requirements for
new website
enhancements.
  Monitor the competition
to identify need for
changes.

The Scope of Operations Management

The scope of operations management ranges across the organization. Operations
management people are involved in:
 product and service design,
 process selection
 selection and management of technology
 design of work systems
 location planning
 facilities planning
 quality improvement of the organization's products or services.

The operations function includes many interrelated activities, such as:

 forecasting
 capacity planning
 managing inventories
 assuring quality
 motivating employees
 locating facilities
 scheduling

Within the operations functions, management decisions can be divided into three broad
areas:
a. Strategic (long term) decisions
Operations management decision at this level impacts the company's long-
range effectiveness in terms of how it can address its customer's needs. Thus, for the
firm to succeed, these decisions must be in alignment with the corporate strategy.

b. Tactical (intermediate term) decisions

Primarily addresses how to efficiently schedule materials and labor within the
constraints of previously made strategy decisions.

c. Operational Planning and Control (short term) decisions

Issues at this level include:
 What jobs do we work on today or this week?
 Who do we assign to what tasks? What jobs are priorities?
Operations resources consist of what we term Five P's of OM
1. Product – ultimate link between the production and marketing processes of a
company
2. Plants -factories or service branches where production is carried out.
3. People - direct and indirect workforce.
4. Processes - equipment and steps by which production is accomplished
5. Program – there should be a proper time schedule for the implementation and
completion of various programs.