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Lecture 1
MBF2213 | Operations ManagementPrepared by Dr Khairul Anuar
L1: Operations Management
• What is operations management?
• Why is operations management important in all types of organization?
• What is the input–transformation–output process?
• What is the process hierarchy?
• How do operations processes have different characteristics?
• What are the activities of operations management?
Key operations questions
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Operations management is the activity of
managing the resources which are devoted to
the production and delivery of products and
services.
Operations management defined
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Slack et al.’s model of operations management
CustomersInput
resources
Output products and services
Transformed resources
• Materials• Information• Customers
Transforming resources
• Facilities
• Staff
Design
Planning and control
Operation’s performance
Operations strategy
Improvement
Operations management
Operations strategy
Slack et al.’s model of operations management
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The consultancy services market – % of world revenues of 40 largest consultancy firms
Marketing/sales2
Operations and process management
31
Corporate strategy17
IT strategy17
Benefits/Actuarial16
Organizational design
11
Financial6
Operations management is fashionable!
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The three basic functions of enterprises
Digital Stock
Ford Motor Company
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Core functional activities
Internet service provider (ISP)
Fast food chain International aid charity
Furnituremanufacturer
Operations
Marketing and sales
Product / service development
Maintain hardware software and content Implement new links and services
Make burgers, etc.Serve customersMaintain equipment
Give service to the beneficiaries of the charity
Make componentsAssemble furniture
Promote servicesto users and get registrationsSell advertising space
Advertise on TVDevise promotional materials
Develop funding contractsMail out appeals for donations
Advertise inmagazinesDetermine pricing policySell to stores
Devise new services and commission new information content
Design hamburgers, pizzas, etc. Design decor for restaurants
Develop new appeals campaignsDesign new assistance programmes
Design newfurnitureCo-ordinate withfashionable colours
The activities of core functions in some organizations
Design a store layout which gives smooth and effective flow
Design elegant products which can be flat-packed efficiently
Site stores of an appropriate size in the most effective locations
Maintain cleanliness and safety of storage area Arrange for fast
replenishment of products
Monitor and enhance quality of service to customers
Continually examine and improve operations practice
Ensure that the jobs of all staff encourage their contribution to business success
Operations management at IKEA
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• The best way to start understanding the nature of ‘Operations’ is to look around you.
• Everything you can see around you (except the flesh and blood) has been produced by an operation.
• Every service you consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation.
• Operations Managers create everything you buy, sit on, wear, eat, throw at people and throw away.
Operations are everywhere
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Interfunctional relationships between operations and other functions
Engineering/ technical function
Accounting and finance
function
Human resources function
Information technology (IT)
function
Understanding of the capabilities and
constraints of the operations process
New product and service ideas
Understanding of the capabilities and
constraints of the operations process
Market requirements
Financial analysis for performance and
decisions
Provision of relevant
data
Recruitment development and training
Understanding of human resource needs
Analysis of new technology options Understanding of
process technology needs
Provision of systems for design, planning and
control, and improvement
Understanding of infrastructural
and system needs
Marketing function
Product/service development
function
Operations function
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• ‘High-end’ sandwich and snack retailer
• Use only ‘wholesome’ ingredients
• All shops have their own kitchens where fresh sandwiches are prepared every day
• Fresh ingredients are delivered early every morning
• Same staff who serve you at lunch made the sandwiches that morning
• ‘We don’t work nights, we wear jeans, we party…’
Prêt a Manger
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Nutritional ‘mechanical’ and aesthetic design of the
sandwiches and snacks
Design, location and management of
stores and in-store processes and the
network that supplies them
The three basic functions at Prêt a Manger
Product/Service
development
OperationsMarketing
Promotional activities, market
research, etc.
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Automobile assembly factory – Operations management uses machines to efficiently assemble products that satisfy current customer demands
Operations management in all types of organization
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Physician (General practitioner) –Operations management uses knowledge to effectively diagnose conditions in order to treat real and perceived patient concerns
Operations management in all types of organization (Continued)
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Management consultant – Operations management uses people to effectively create the services that will address current and potential client needs
Operations management in all types of organization
Source: Shutterstock.com: Indianstockimages
Disaster relief charity –
Operations management uses ours and our partners’ resources to speedily provide the supplies and services that relieve community suffering
Operations management in all types of organization (Continued)
17
Advertising agency – Operations management
uses our staff’s knowledge and experience to creatively present ideas that delight clients and address their real needs
Operations management in all types of organization (Continued)
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machines
Operations management uses…
to efficiently assemble products
effectivelyknowledgeto treat real and perceived patient
concerns
diagnose conditions
to
people create services that will address current and
potential client needs
effectivelyto
ours and our partners’ resources
speedily provide supplies and services that relieve
community suffering
to
our staff’s knowledge and
experience
creatively ideas that delight clients and address
their real needs
presentto
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The business environment is
changing, for example:
Prompting operations responses, for
example:
• Increased cost-based competition
• Higher quality expectations
• Demands for better service
• More choice and variety
• Rapidly developing technologies
• Frequent new product/service
introduction
• Increased ethical sensitivity
• Environmental impacts are more
transparent
• More legal regulation
• Greater security awareness
• Globalization of operations networking
• Information-based technologies
• Internet-based integration of operations
activities
• Supply chain management
• Customer relationship management
• Flexible working patterns
• Mass customization
• Fast time-to-market methods
• Lean process design
• Environmentally sensitive design
• Supplier ‘partnership’ and development
• Failure analysis
• Business recovery planning
Operations management is changing
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Operations input resources and outputs
Outputs are products and services that add value for customers
Customers
Transformed resources
• Ingredients • Packaging • Customers
Inputs and outputs at Prêt a Manger
Input resources
Served and satisfied customers
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Transforming resources
• Equipment • Fittings • Staff
Predominantly
processing inputs of
materials
Predominantly
processing inputs of
information
Predominantly
processing inputs of
customers
All manufacturing
operations
Mining companies
Retail operations
Warehouses
Postal services
Container shipping line
Trucking companies
Accountants
Bank headquarters
Market research
company
Financial analysts
News service
University research unit
Telecoms company
Hairdressers
Hotels
Hospitals
Mass rapid transports
Theatres
Theme parks
Dentists
Examples of dominant transformed resource inputs
Mixture of products and services – Outputs that
are a mixture of the tangible and intangible
Prèt a Manger
Acme Whistles
Mwagusi Safari Lodge
Crude oil production
Aluminium smelting
Specialist machine tool production
Restaurant
Information systems provider
Management consultancy
Psychotherapy clinic
Pure products –Outputs that are exclusively
tangible
Pure services – Outputs that are exclusively
intangible
IKEA
Most operations produce products and services
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Figure 1.4
Changes in the business environment are shaping a new
operations agenda
Most operations produce products and services
Operation Some of the operation’s
inputs
Some of the operation’s
processes
Some of the
operation’s outputs
Airline Aircraft
Pilots and air crew
Ground crew
Passengers and freight
Check passengers in
Board passengers
Fly passengers and freight
around the world
Care for passengers
Transported
passengers and freight
Department
store
Products for sale
Sales staff
Information systems
Customers
Source and store products
Display products
Give sales advice
Sell products
Customers and
products ‘assembled’
together
Police Police officers
Computer systems
Information systems
Public (law-abiding and
criminals)
Crime prevention
Crime detection
Information gathering
Detaining suspects
Lawful society, public
with a feeling of
security
Frozen food
manufacturer
Fresh food
Operators
Processing technology
Cold storage facilities
Source raw materials
Prepare food
Freeze food
Pack and freeze food
Frozen food
Some operations described in terms of their processes
Flow between operations
The level of the supply network
The level of the operation
Flow between processes
The level of the process
Flow between resources
Operations can be analyzed at three levels
Operations management is concerned with the flow of transformed resources between operations, processes, where
Processes form an internal ‘supply network’ and become each others customers and suppliers
External operations interact with internal processes to form the external supply network
Operations can be analyzed at three levels (Continued)
Flow between operations
Flow between processes
Flow between resources
The supply network – Flow between operations
Broadcasting company
Promotion agency
Studios
Casting agency
Creative agency
A programme and video supply
networkProgramme/
videomaker
The programme and video operation
The operation – Flow between processes
Example of analysis at three levels
The supply network – Flow between operations
Programme and video maker
Example of analysis at three levels (Continued)
The programme and video operation
The operation – Flow between processes
Production unit
Set and props manufacture
Engineering
Marketing and sales
Finance and accounting
Post production
The supply network – Flow between operations
Programme and video maker
Example of analysis at three levels (Continued)
The operation – Flow between processes
Set and props manufacture
Set design Props
acquisition
Set construction
Set finishing
The ‘Set and props
manufacturing’ process
End-to-end process for programme production
Programme set and props manufacture
Engineering
Programme marketing and
salesProgramme
production unit
Programme finance and accounting
Programme post production
End-to-end process for music video production
Music video set and props
manufacture
Music video marketing and
sales
Music videoproduction unit
Music video finance and accounting
Music video post production
The television and video company divided into two ‘end-to-end’ business processes
33
Any organization
OperationsMarketing
SalesFinance
Human resources
Information systems
All functions use processes to provide service
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Two ‘end-to-end’ business processes
Table 1.4Some examples of processes in non-operations functions
Financial services
An account management centre at a large retail bank
Financial analyst advising a client at an
investment bank
Furniture manufacturing
Mass production of kitchen units
Craft production of reproduction
‘antique’ furniture
Hotels
Value-for-money hotel
Lobby of an international luxury hotel
Differences within sectors are often greater than the differences between sectors
Photodisc. Photolink. Jack Star
Pearson Education Ltd. MindStudio
Pearson Education Ltd. Rob Judges
Photodisc. Life File. Emma Lee
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Variation in demand High Low
VisibilityHigh Low
VarietyHigh Low
HighVolumeLow High
A typology of operations and processes
The 4 Vs
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High
Implications
• Low repetition• Each staff member
performs more of each task
• Less systemization• High unit costs
Implications
• High repeatability• Specialization• Capital intensive• Low unit costs
VolumeLow
A typology of operations and processes (Continued)
The implications of high and low Volume in operations and processes
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Low
Implications
• Flexible• Complex• Match customer
needs• High unit costs
Implications
• Well defined• Routine• Standardized• Regular• Low unit costs
VarietyHigh
The implications of high and low Variety in operations and processes
A typology of operations and processes (Continued)
40
Low
Implications
• Changing capacity
• Anticipation• Flexibility• In touch with
demand• High unit costs
Implications
• Stable• Routine• Predictable• High utilization• Low unit costs
Variation in demand
High
The implications of high and low Variation in operations and processes
A typology of operations and processes (Continued)
41
Low
Implications
• Short waiting tolerance
• Satisfaction governed by customer perception
• Customer contact skills needed
• Received variety is high
• High unit costs
Implications
• Time lag between production and consumption
• Standardization• Low contact skills• High staff
utilization• Centralization• Low unit costs
VisibilityHigh
The implications of high and low Visibility in operations and processes
A typology of operations and processes (Continued)
42
Volume
Important to understand how different operations are positioned on the 4 Vs.
Is their position where they want to be?
Do they understand the strategic implications?
Variety
Variation
Visibility
Low
High
High
High
High
Low
Low
Low
Mwagusi Safari Lodge
Formule 1 Hotel
A 4 Vs profile of two operations
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