INTRODUCTION TO

OPERATIONS
MANAGEMENT

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INTRODUCTION
 Operations management: the design,
operation, and improvement of productive
systems.
 Operations: a function or system that

transforms inputs into outputs of greater

value.
 Value chain: a series of activities from

supplier to customer that add value to a

product or service.

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 SCOPE OF OPERATION MANAGEMENT
 What is operation management
 Manufacturing versus service operations

 Value chain management- value chain analysis

 Product and service design – House of quality

 Process selection

 Facilities layout

 Location planning

 Capacity planning

 Inventory management

 Quality management

 Lean manufacturing/ productivity

 Selection and management of technology

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 INTRODUCTION
 Operations: a function or system that
transforms inputs into outputs of greater value.
 What is Operations Management?

 the design, operation, and improvement of

productive systems.
The transformation process can be
 physical, as in manufacturing operations
 locational, as in transportation or warehouse
 exchange, as in retail operations;
 physiological, as in health care;
 psychological, as in entertainment;
 or informational, as in communication

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INTRODUCTION
Conversion of inputs to outputs

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CHARACTERISTICS OF GOODS
 Tangible product
 Consistent
product definition
 Production usually
separate from
consumption
 Can be
inventoried
 Low customer © 1995 Corel Corp.

interaction OP
M
533
CHARACTERISTICS OF SERVICE
 Intangible product
 Produced & consumed at
same time

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 Often unique
 High customer interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed

OP
M
PRODUCTION OF GOODS VERSUS
SERVICES
Example of food processor – Goods oriented

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
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PRODUCTION OF GOODS VERSUS
SERVICES
Example of Hospital – Act oriented

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

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PRODUCTIVITY

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 PRODUCTION PROCESS SELECTION

 Classification by type of customer order:

 Make to stock (MTS):produce finished good, customer buy from
inventory
 Make to order (MTO):start production when customer [Link],
furniture,
 Assemble to order (ATO):make parts and subassemblies; finish
when customer places order. Eg cake

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PRODUCTION PROCESS SELECTION :WHAT
PROCESSES SHOULD THE ORGANIZATION USE?

 Projects take a long time to complete, involve a large

investment of funds and resources, and produce one item at
a time to consumer order. Examples include construction
projects, shipbuilding, new-product development, and
aircraft manufacturing.
 Batch production processes many different jobs through
the production system at the same time in groups or
batches. Products are typically made to customer order,
volume (in terms of customer order size) is low, and demand
fluctuates. Examples of batch production include printers,
bakeries, machine shops, education and furniture making

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PRODUCTION PROCESS SELECTION

 Mass production produces large volumes of a standard

product for a mass market. Product demand is stable, and
product volume is high. Goods that are mass produced
include automobiles, televisions, personal computers, fast
food, and most consumer goods.
 Continuous production is used for very high-volume
commodity products that are very standardized. The system
is highly automated and is typically in operation
continuously 24 hours a day. Refined oil, treated water,
paints, chemicals, and foodstuffs are produced by
continuous production.

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PRODUCTION PROCESS SELECTION

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 CAPACITY PLANNING :MAXIMUM
CAPABILITIES TO PRODUCE
 Volume/no. of units that can be manufactured
in given time period
 Factors: Market conditions, input constraints, Govt.
policy. Technology (feasible normal capacity of machine
in normal conditions)
 Determination and adjustment of
organization's ability to produce products or
services to match demand:
 Create additional shifts and hire more people to work
 Ask existing people to work overtime
 Outsource or subcontract extra work to other firms
 Expand a plant and add more equipment

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 FACILITIES LAYOUT
 Facility layout refers to the arrangement of activities, processes,
departments, workstations, storage areas, aisles, and common areas
within an existing or proposed facility. The basic objective of the layout
decision is to ensure a smooth flow of work, material, people, and
information through the system.
 Process layouts:
 Machines that perform a similar functions or task are grouped together
eg: metal bracket (cutting, drilling , bending ,painting); bank (loan
officers, tellers, manager);
 Product layouts:
 Task and machine are arranged in progressive steps .to produce a
single product efficiently, eg: automobile assembling line
 Hybrid layouts or Cellular layout
 Combine aspects of both process and product layouts. Eg groups of
people undergoing insurance claiming process are grouped together
 Fixed-Position layouts:
 Product is two large to move; e.g. a building . Aeroplane,ship design
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PROCESS LAYOUT

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PRODUCT LAYOUT

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DIFFERENCE BETWEEN PROCESS
/PRODUCT

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FIXED-POSITION LAYOUTS: ARE USED FOR
PROJECTS IN WHICH THE PRODUCT CANNOT BE
MOVED.

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COMBINED/HYBRID LAYOUT

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COMBINED/HYBRID LAYOUT

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 LOCATION PLANNING
 Factors that are considered when selecting the part of the
country and community for a facility are summarized as
follows:
 • Labor (availability, education, cost,
 • Business climate and unions)
 • Community services
 • Proximity of customers • Incentive packages • Number of
customers
 • Government regulations • Construction/leasing costs
 Environmental regulations • Land cost • Raw material
availability • Modes and quality of transportation •
Commercial travel • Transportation costs • Climate •
Community government • Infrastructure (e.g., roads, water,
sewers) • Local business regulations • Quality of life •
Government services • Taxes (e.g., Chamber of Commerce) •
Availability of sites • Financial services • Proximity of 25
suppliers • Community inducements • Education system
LOCATION PLANNING

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LOCATION PLANNING

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RELIABILITY

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ECONOMIC ORDER QUANTITY

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ECONOMIC ORDER QUANTITY

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ECONOMIC ORDER QUANTITY

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ECONOMIC ORDER QUANTITY

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ECONOMIC ORDER QUANTITY

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 INVENTORY MANAGEMENT
 Inventory is the goods the organization keeps on hand for use in
production process
 Types of inventory: Finished goods, Work-in process , raw materials

Economic order quantity: designed to minimize the total of ordering

costs and holding costs for inventory items.

 Ordering costs (C) are costs associated with actually placing the
order such as postage, receiving, inspection , transportations cost to
purchase

 Holding costs (H) are costs associated with keeping items on hand
such as storage space charges, finance charges, materials handling
expense, cost of spoilages, insurance costs etc

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ECONOMIC ORDER QUANTITY

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