2. Why Should you study POM
• A business education is incomplete without an
understanding of modern approaches to managing
operations.
• Operations management provides a systematic
way of looking at organizational processes.
• Operations management presents interesting career
opportunities.
• The concepts and tools of OM are widely used in
managing other functions of a business.
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3. Back office Kitchen unit
operation in manufacturing
a bank operation
They are all
operations
Take-out /
Retail restaurant
operation operation
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4. The operations function is fashionable!
The consultancy services market
% of world revenues of 40 largest firms
Financial Marketing/sales
6 2
Organizational
design
11 Operations and process
management
31
Benefits/Actuarial
16
IT strategy Corporate strategy
17 17
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5. Introduction
• Plan, design and operate production system / subsystems
that create and deliver the firm’s primary products and
services and to achieve organizational goals
• Note that:
– Operations management deals with process
– Management in a broad, systems sense
– Subsystems are operations too
– Multiple goals: efficiency, productivity, cost minimization
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6. Managers Need Knowledge Of
• Production processes
• Operations management processes
• Decision making tools
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8. Introduction
• Operations management is the management of
an organization’s productive resources or its
production system.
• A production system takes inputs and converts
them into outputs.
• The conversion process is the predominant
activity of a production system.
• The primary concern of an operations manager
is the activities of the conversion process. C1 -
9. Organizational Model
Finance
Sales HRM
OM
QA
Marketing
MIS Accounting
Engineering
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10. Some inter-functional relationships between the
operations function and other core and
support functions
Engineering/ Understanding of the Product/service
technical capabilities and development
function constraints of the function
operations process
Analysis of new
technology options Understanding of
process technology
Accounting needs New product and
Provision service ideas
and finance of relevant Understanding of the
function data capabilities and
Operations constraints of the
Financial analysis function operations process
for performance
and decisions Market
requirements
Marketing
Understanding of human
Understanding Provision of systems for
function
resource needs
of infrastuctural design, planning and
Recruitment and system control, and improvement
development needs
and training
Human Information
resources technology
function (IT) function
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12. Operations Management As a
Function
Skill Areas
• Quantitative
methods
• Organizational
behavior
• General management
• Information systems
• Economics
• International
business
• Business ethics
and law
Figure 1.3
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13. The position of the operations function
Accounting Product
Marketing Operations
and finance development
Call on Manage Retranslate Conduct
Church newcomers appeals scriptures weddings
Fast food Advertise on Pay Design Make
chain television suppliers hamburgers hamburgers
Furniture Sell to Design new Assemble
Pay staff
manufacturer stores furniture furniture
Process Identify Raise Develop Make and
perspective needs capital product distribute
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14. (Input Conversion / Transformation Output)
Environment :- *Customer * Competitors *Suppliers
*Government regulations * Technology * Economy
Input
Transformed
Resources The Transformation
Material Process Output
Information
Customer Physical Properties Good or
Informational Properties Services
Possession
Location
Input Transforming Storage/Accommodation
Resources Physiological State Volume
Psychological State Variety
Facilities Variation
Staff Visibility
Monitoring & Control
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15. Continuum of Characteristics
More like a More like
manufacturing a service
organization organization
• Physical, durable product • Intangible, perishable
• Output that can be product
inventoried • Output that cannot be
• Low customer contact inventoried
• Long response time • High customer contact
• Regional, national, or • Short response time
international markets • Local markets
• Large facilities • Small facilities
• Capital intensive • Labor intensive
• Quality
Figure 1.4 easily measured
• Quality not easily measured
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16. Physical / Informational Output
• Physical Outputs • Informational Outputs
• Seller no longer owns • Seller continues to
when sold possess after sale and
• Replication requires can sell again
manufacturing • Replication at negligible
• Output exists in single cost and without limit
location • Output can exist in
• Wears Out multiple locations
simultaneously
• Does not wear out
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17. The output from most types of operation is a
mixture of goods and services
Pure goods
Crude oil production
Tangible
Can be stored
Aluminium smelting
Specialist machine tool Production precedes
consumption
Low customer
manufacturer
contact
Can be transported
Quality is evident
Restaurant
Computer systems
services
Intangible
Management
Psychotherapy clinic
consultancy
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to
judge
Pure services
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18. Facilitating Good Concept
• Often confusion in trying to classify
organization as manufacturer or service
• Facilitating good concept avoids this
ambiguity
• All organizations defined as service
• The tangible part of the service is defined as
facilitating good
• Pure Services
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21. Comparison of Alternative
Economic Offerings
Economic
Offering Commodities Goods Services Experiences
Value added Extracting Producing Delivering Staging
by
Form of Fungible Tangible Intangible Memorable
output
Key Natural Standardized Customized Personalized
characteristics
Buyer Market User Client Guest
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22. A Typology of
IMPLICATIONS Operations IMPLICATIONS
Low repetition High repeatability
Each staff member Low Volume High Specialization
performs more of job Systemization
Less systemization Capital intensive
High unit costs Low unit cost
Well defined
Flexible
Routine
Complex High Variety Low Standardized
Match customer needs
Regular
High unit cost Low unit costs
Changing capacity Stable
Anticipation Routine
Flexibility High Variation in demand Low Predictable
In touch with demand High utilization
High unit cost Low unit costs
Time lag between
Short waiting tolerance production and
Satisfaction governed by consumption
customer perception Standardized
Customer contact skills Low contact skills
needed High Visibility Low
High staff utilization
Received variety is high
Centralization
High unit cost
Low unit costs
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23. Scope of POM
• A) GENERAL PHASE
1Operations Management
(Input Conversion / Transformation Output)
2Strategic Role ( Strategy and five performance
objectives)
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24. Scope of POM Cont…
• B) DESIGN PHASE
3 Design of Products and Services
4 Design of Operations Network
a) Capacity Decision
b) Layout Decision
c) Location Decision
d) Supply Chain Decision
5 Process Technology
6 Job Design & Work Organization
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25. Scope of POM Cont…
• C) PLANNING & CONTROL
7 Capacity Planning and Control
8 Inventory Planning and Control
9 Supply Chain Planning and Control
10 MRP ( Material Requirement Planning )
11 Quality Planning and Control
12 Project Planning and Control
13 JIT ( Just In Time) Planning and Control
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30. D. Operations Management,
Productivity & Competitiveness
(1990-93) (1982-93)
Productivity Labor cost
growth (%) increase (%)
U.S. 2.5 16.1
Canada 2.4 16.2
Japan 1.8 123.9
Germany 1.2 100.8
Sweden 4.2 26.3
U.K. 4.5 27.0
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31. Operations Management Uses
• apply quality tools to tax work
• project management used on merger
• inventory theory for personal purchases
• job design improves home chores
• flexible spending accounts analyzed as
inventory models
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