BMGT25 Om

BMGT 25 OPERATION MANAGEMENT
Operation Management
Chapter One:
Outline:
 What is operations Management?
 Organizing to Produce Goods and Services
 The Supply Chain
 Why Study OM?
 What Operations Managers Do?
 The Heritage of Operations Management
 Operations for Goods and Services
 The Productivity Challenge
 New Challenges in Operations Management
 Ethics, Social Responsibility and sustainability
LEARNING OBJECTIVES
 Define operations management.
 Explain the distinction between goods and services
 Explain the difference between production and productivity
 Identify the critical variables in enhancing productivity.
Operation Management:
 It is the process, which combines and transforms various resources used in
the production/operation subsystem of the organization into value added
products/services in a controlled manner as per the policies of the
organization.
 It is that part of the organization which is concerned with the transformation of
a range of inputs into the required (products/services) having the requisite
quality level.
 The set of interrelated management activities, which are involved in
manufacturing a certain product, is called Production Management.
OBJECTIVE OF OPERATIONS MANAGEMENT:
 to produce goods/services of the right quality and quantity at the right time
and right manufacturing cost’
1. RIGHT QUALITY
The quality of product is established based upon the customer needs. The right quality is
not necessarily best quality
2. RIGHT QUANTITY
The manufacturing organization should produce the products in right number. If they are
produced in excess of demand the capital will block up in the form of inventory and if the
quantity is produced in short of demand, leads to shortage of products
3. RIGHT TIME
Timeliness of delivery is one of the important parameter to judge the effectiveness of
production department. The production department has to make the optimal utilization of
input resources to achieve its objective.
4. RIGHT MANUFACTURING COST
Manufacturing costs are established before the product is actually manufactured. Hence,
all attempts should be made to produce the products at pre-established cost, so as to
reduce the variation between actual and the standard (pre-established) cost.
ORGANIZING TO PRODUCE GOODS AND SERVICES
 MARKETING
 PRODUCTION/OPERATION
 FINANCE/ACCOUNTING
CONCEPT OF OPERATION
 Operation is defined in terms of the
mission it serves for the organization,
technology it employs and the human and
managerial processes it involves.
 Manufacturing operation is a conversion
process that includes manufacturing yields
a tangible output: a product.
 Service operations is a conversion process
that includes service yields an intangible
output: a deed, a performance, an effort.
Good Operations Service Operations

Tangible products Intangible products
Less customer contact More customer contact
More reliance on capital investment and Less reliance on capital investment and
specialized equipment specialized equipment
Less reliance on skilled labour More reliance on skilled labour
THE SUPPLY CHAIN MANAGEMENT

 A global network of organizations and activities that supply a firm with good
and services.
 The supply chain also represents the steps it takes to get the product or
service from its original state to the customer.
SUPPLY CHAIN MANAGEMENT

Ex: Farmer — Syrup Production — Bottler — Distributor — Retailers — Customers
FOUR REASONS WHY WE STUDY OM

1. OM is one of the three major functions of any organizations, and it is integrally
related to all the other business functions. All organizations market (sell), finance
(account), and produce (operate).
2. We study OM because we want to know how goods and services are produced. The
production function is the segment of our society that creates the products and
services we use.
3. We study OM to understand what operations managers do. Regardless of your job in
an organization, you can perform better if you understand what operations managers
do.
4. We study OM because it is such a costly part of an organization. A large percentage

of the revenue of most firms is spent in the OM functions.
TASKS OF THE OPERATIONS MANAGER

 Planning is the activity that establishes a course of action and guide future decision-
making.
 Leading refers to the process of motivation, communication and leadership.
 Organizing is the activities that establish a structure of tasks and authority.
 Controlling is the activities that assure the actual performance in accordance with
planned performance.
 Staffing is the process of recruiting, selecting and training of men. Involves manning
the organizational structure through proper and effective evaluation, selection and
development of people to perform the roles.
HERITAGE OF OPERATIONS MANAGEMENT

 Cost Focus – to minimize cost of production
 Quality Focus – the best quality, standard
 Customization Focus – criteria, customer’s preference
 Globalization Focus – international standard, out beside the local
OPERATIONS FOR GOODS AND SERVICES

CHARACTERISTICS OF SERVICES CHARACTERISTICS OF GOODS
INTANGIBLE: Ride in an airline seat TANGIBLE: The seat itself
Produced and consumed simultaneously: The products can usually be kept in
beauty Salon produces a haircut that is inventory (beauty care products)
consumed at it is produced.
UNIQUE: your investment and medical Similar products produced (iPods)
care are unique
High customer interaction: often what the Limited customer involvement in production
customer is paying for (consulting.
Education)
Inconsistent product definition: auto Product standardized (iPhone)
insurance changes with age and type of
car
Often knowledge based Legal, education Standard tangible product tends to make
and medical services are hard to automate automation feasible
Services dispersed: service may occur at Product typically produced at a fixed facility
retail store, local office, house call, or via
internet
Quality maybe hard to evaluate: consulting Many aspects for quality for tangible
education and medical services products are easy to evaluate (strength of
bolt)
Reselling is unusual: musical concert or Product often has some residual value
medical care

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BMGT 25 OPERATION MANAGEMENT

Good Operations Service Operations

THE SUPPLY CHAIN MANAGEMENT

SUPPLY CHAIN MANAGEMENT

FOUR REASONS WHY WE STUDY OM

4. We study OM because it is such a costly part of an organization. A large percentage

TASKS OF THE OPERATIONS MANAGER

HERITAGE OF OPERATIONS MANAGEMENT

OPERATIONS FOR GOODS AND SERVICES

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