Module - 1 2

Introduction to
Operations
Management
Module 1
L
E
A 1.Describe operations and supply chains in terms of
R
inputs, processes, outputs, information flows,
N
I suppliers, and customers.
N 2.Define an operations strategy and its linkage to
G corporate strategy, as well as the role it plays as a
source of competitive advantage in a global
O
U marketplace.
T 3.Identify nine competitive priorities used in operations
C strategy, and their linkage to marketing strategy.
O 4.Explain how operations can be used as a competitive
M weapon.
E
5.Identify the global trends and challenges facing
S
operations management.
Operations management refers to the systematic
design, direction, and control of processes that
transform inputs into services and products for
internal, as well as external customers.
An operation is a group of resources performing all or
part of one or more processes.
Processes can be linked together to form a supply
chain, which is the interrelated series of processes within
a firm and across different firms that produce a service or
product to the satisfaction of customers
Figure 1. Integration between Different Functional Areas of
a Business (Krajewski, Ritzman, and Malhotra 2016)
How Processes Work
Any process has inputs and outputs. Inputs can include a

combination of human resources (workers and
managers), capital (equipment and facilities), purchased
materials and services, land, and energy. Processes
provide outputs to customers. These outputs may often
be services (that can take the form of information) or
tangible products. Every process and every person in an
organization has customers.
Internal
customers and
internal
suppliers
External
customers and
external
suppliers
Service and Manufacturing Processes
The outputs from manufacturing processes

can be produced, stored, and transported
in anticipation of future demand.
The outputs of service processes typically

cannot be held in a finished goods
inventory to insulate the process from
erratic customer demands.
Figure 3. Continuum Characteristics of Manufacturing and Service
Processes (Krajewski, Ritzman, and Malhotra 2016)
Supply Chain View
Most services or products are produced through a

series of interrelated business activities. Each activity
in a process should add value to the preceding
activities; waste and unnecessary cost should be
eliminated.
Figure 4. Supply Chain Linkages (Krajewski, Ritzman, and
Malhotra 2016)
Core Processes
1. Employees in the supplier relationship process select the suppliers

of services, materials, and information and facilitate the timely and
efficient flow of these items into the firm
2. Employees in the new service/product development process design
and develop new services or products.
3. The order fulfillment process includes the activities required to
produce and deliver the service or product to the external customer
4. Employees involved in the customer relationship process identify,
attract, and build relationships with external customers, and facilitate
the placement of orders by customers.
Support Process
Human resources function Legal function
Accounting function Information system function

Operations Strategy Corporate Strategy
It is at the heart of provides an overall direction

managing processes and that serves as the framework
supply chains. A firm’s for carrying out all the
internal processes are only organization’s functions. It
building blocks. specifies the business or
businesses the company will
pursue, isolates new
opportunities and threats in
the environment, and
identifies growth objectives.
Figure 5. Connection between Corporate Strategy and Key Operations Management (Krajewski, Ritzman, and Malhotra 2016)
Developing a corporate strategy involves
four considerations:
Developing Developing
Environmental
Scanning
Core Core
Competencies Processes Global
Strategies
Market Analysis
• the process of identifying groups of customers

with enough in common to warrant the design
Market and provision of services or products that the
group wants and needs. To identify market
segmentation segments, the analyst must determine the
characteristics that clearly differentiate each
segment
• identifies the needs of each segment and

assesses how well competitors are
Needs addressing those needs
• Service or Product Needs, Delivery System
assessment Needs , Volume Needs Other Needs
Competitive Priorities and Capabilities
A customer-driven operations strategy requires a

cross-functional effort by all areas of the firm to
understand the needs of the firm’s external customers
and to specify the operating capabilities the firm
requires to outperform its competitors.
1.Competitive priorities are the critical operational
dimensions a process or supply chain must possess to
satisfy internal or external customers, both now and in
the future.
2. Competitive capabilities are the cost, quality, time, and

flexibility dimensions that a process or supply chain actually
possesses and is able to deliver.
Order Winners and Order Qualifiers
Another useful way to examine a firm’s ability to be successful in the marketplace is to identify the
order winners and order qualifiers.
1. An order winner is a criterion that customers use to

differentiate the services or products of one firm from
those of another. Order winners can include price (which
is supported by low-cost operations) and other
dimensions of quality, time, and flexibility.
2. Minimal level required from a set of criteria for a firm to

do business in a particular market segment is called an
order qualifier. Fulfilling the order qualifier will not ensure
competitive success; it will only position the firm to
compete in the market.
Nine competitive priorities
used in operations strategy
Trends in Operations
Management
1. Flexibility
2. Total Quality management System
3. Time Reduction
4. Worker Involvement
5. Business Process Re-engineering
6. Global market Place
7. Operations Strategy
8. Lean production
9. Computer Aided manufacturing
10. 3D Printing
11. E-supply chain management
12. Just-in-time production
13. Enterprise resource planning
14. Environmental issues
Productivity Improvement
Productivity is a basic measure of performance for
economies, industries, firms, and processes. Improving
productivity is a major trend in operations management
because all firms face pressures to improve their
processes and supply chains so as to compete with their
domestic and foreign competitors. Productivity is the value
of outputs (services and products) produced divided by the
values of input resources (wages, cost of equipment, and
so on) used:
Productivity = Output / Input

Measures of Productivity
Labor productivity growth reflects the

change in the amount of output per hour
paid.
Labor Productivity = Total output
total man-hours or
Total output
number of workers
The higher the labor productivity, the less labor input is required to
produce a given level of output.
Multifactor productivity growth – refers to the
contribution of changing management processes
and technology towards output growth.
Productivity = Output
(Labor + material + capital) or
Output
(labor +capital + energy)
Partial measure =
or or or
Total measure
Output 13, 500 Total Measure
Total output 13,500 = 0.89

Inputs Total input 15,193
1. Labor 3,000
2. Material 153 Multifactor measures
3. Capital 10,000 Total output 13,500 = 4.28
4. Energy 540 Labor + material 3,153
5. Other 1,500
expenses
Total input 15,193 Partial
measures
Total output 13,500 = 25
energy 540

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Module - 1 2

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Introduction to

Any process has inputs and outputs. Inputs can include a

The outputs from manufacturing processes

The outputs of service processes typically

Most services or products are produced through a

1. Employees in the supplier relationship process select the suppliers

Human resources function Legal function

Accounting function Information system function

It is at the heart of provides an overall direction

• the process of identifying groups of customers

• identifies the needs of each segment and

A customer-driven operations strategy requires a

2. Competitive capabilities are the cost, quality, time, and

1. An order winner is a criterion that customers use to

2. Minimal level required from a set of criteria for a firm to

Productivity = Output / Input

Labor productivity growth reflects the

Total output 13,500 = 0.89

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