March 13, 2017

Introduction to the Field of Operations Management - Review Notes

Planned Revision of Operations Management Chapters Starts on 16 March

The goal of operations management is wealth creation.
It is done by supplying quality goods and services effectively and efficiently

Role of Industrial Engineering in Operations Management

Industrial engineering contributes to operations management by increasing the efficiency of operations. Wealth creation round 1 is done by operations managers. Wealth creation round 2 is done by industrial engineers in operations systems.

Wealth creation is continuously done everyday by Shopfloor operators and their managers based on the designs and plans created by operations managers and industrial engineers.

Based on the Chapter 1 Introduction to the Field by Chase, Jacobs, Aquilano 12 Edition

The essence of operations management: creating great value to the customer while reducing the cost of delivering the good or service.

In the context of this book, "operations" refers to the processes that are used to transform the resources employed by a firm into products and services desired by the customers. "Supply" refers to how materials and services are moved to and from the transformation processes of the firm.

Great operations and supply management is essential to the success of the firm doing business in goods or services.

This subject will provide you knowledge of concepts and tools to be  employed by companies around the world to craft effective and efficient operations. Efficiency means doing something at the lowest possible cost.  We can also say the goal of an efficient process is to produce a good or provide a service by using the smallest input of resources.  Effectiveness mean doing the right things to create the  most value for the company. Managers are responsible for effectiveness first. They have to find what customers want and then make arrangement for producing those items. Effectiveness in enhanced by understanding customers' needs and designing products that are acceptable to them.

A business education is incomplete without an understanding of modern approaches to managing operations. Operations management (OM) provides a systematic way of examining organizational processes. OM presents interesting career opportunities and the concepts and tools of OM are widely used in managing other functions of a business.

While marketing uncovers needs of people in general and uncovers needs of people at a particular point and books orders for the goods and services, it is the operations function of a business firm that develops goods and services and produces and delivers them to customers at the place where they desire the delivery.

Other Explanations of Operations Management

MIT's Explanation of Operations Management.

Operations Management deals with the design and management of products, processes, services and supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want.

University of Strathclyde, Glasgow

Operations management is a value-adding area of an organisation concerned with innovation, production and distribution of goods and services to customers whilst ensuring that the use of organisational resources remains efficient and effective.

Chase, Jacobs, Aquilano - Earlier Editions

In this chapter in the book, the time frame of management decisions is discussed along with the different types of transformation processes. Services are compared to goods production with emphasis on the primary inputs, resources, the primary transformation functions, and the typical desired outputs in a variety of service and operations examples. Value-added services are also discussed along with their benefit to external customers.

Operations management is identified within the organizational chart and its role in the organization is defined. Chapter one presents a concept map and outlines the textbook chapters. The chapters are grouped by the key themes of strategic planning, project management, decision analysis, quality, supply chain management, and e-commerce.

The historical roots of the development of OM are traced from scientific management through the moving assembly line, the Hawthorne studies, and on to today's current manufacturing topics including supply chain management and e-commerce. This chapter concludes with current issues facing OM executives including effectively consolidating the operations resulting from mergers, developing flexible supply chains to enable mass customization of products and services, managing global suppliers, production, and distribution networks, increased commoditization of suppliers, achieving the service factory, and achieving excellent service from service firms.

What is Operations Management?

Operations managemetn (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm's primary products and services.

Operations management is a functional field of business with clear line management responsibilities. OM is frequently confused with operations research and management science (OR/MS) and industrial engineering. While all three are fields of management, both IE and OR/MS are staff management disciplines while OM is line management field. Operations management uses the tools of IE as well as OR/MS directly as well as indirectly through the project reports prepared by specialists, OM's role is distinct from these two disciplines.

Companies around the world desire effective and efficient operations. Operations managers design and operate the operations systems effectively and efficiently.

What is the difference between effectiveness and efficiency? 

Effectiveness mean doing right things that customers want to the specifications finalized by the organization. This effectiveness can be a daily issue in an organization producing custom products as the customer can keep on changing his requirement. The operations managers have to listen to the customer and agree on the specification and communicate the same to people in their works. Then they have to control the activity so that what is desired is getting produced. Effectiveness activities take significant time of managers. In production shops, a staff activity production planning and control helps production managers in ensuring the delivery of right product in right quantity at right time. So even in effectiveness activities, operations managers use staff specialists.

Efficiency means doing something at the lowest possible cost. Operations managers have to supply the agreed product at the lowest possible cost. They have the responsibility to make their operations efficient. So operations managers have to learn efficiency techniques and methods. Frederick Taylor emphasized efficiency along with effectiveness in his famous paper "Shop management". Industrial engineering is the discipline that emerged to take care of efficiency dimension of operations as a staff management discipline.

In operations management, three categories of decisions are taken.

Strategic (long-term) decisions
Tactical (intermediate-term) decisions
Operational planning and control (short-term) decisions

Strategic issues include what product (sevice) shall we make? How will we make the product? (technology decision) Where do we locate the facility or facilities? How much capacity do we build? Intermediate decisions can be thought of as annual plans, material purchase policies, staff levels adjustments and working capital support requirements for inventory financing. Operations decisions are daily machine dispatching decisions.

Chapter outline

Operations Management—A Critical Responsibility of Every Manager
Efficiency Defined
Effectiveness Defined
Value Defined

What is Operations Management?
Operations Management (OM) Defined

Transformation Processes
Transformation Process Defined
Differences Between Services and Goods

OM in the Organizational Chart

Operations as Service
Core Services Defined
Value-Added Serviced Defined

Why is Operations Not Perceived as Important?

Historical Development of OM
Mass Customization Defined
Manufacturing Strategy Paradigm
Service Quality and Productivity
Total Quality Management and Quality Certification
Business Process Reengineering

Supply Chain Management

Supply chain management is the name given to total system approach to managing the flow of information, materials, and services from raw material producers and suppliers through various factories and warehouses to the end customer of a consumer item or capital equipment or service.

A supply chain is a network of supply and operations processes. "Operations" refers to the processes that are used to transform the resources employed by a firm into products and services desired by customers. "Supply" refers to how materials and services are moved to and from the transformation processes of the firm.

From a company point of view Supply Chain manager is the former Works manager. The designation, works managers did not indicate his responsibility for supply chain even though he was handling that function in many companies. Designating his as Supply Chain Manager or as Supply Chain and Works Managers, will make him feel responsible for Supply Chain Design, Strategy and Operations.

Electronic Commerce

Current Issues in Operations Management

Case: Fast-Food Feast


McGraw Hill Operations Management Center

Presentation Slides - Field of Operations Management

Full chapter from Chase's Book

Summaries of all Chapters of Operation Management

Updated updated 16 March 2017,  2 Feb 2015,  3.12.2014, 10.2.2012

MBA Core Management Knowledge - One Year Revision Schedule

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