introduction to operations management

Kamran RahatMBA-University of KarachiME (Construction Management)-NED UniversityBE (Civil)-NED UniversityPGC (Advanced Project Management)-NED University

Cells: 0345-8114486, 0315-9222848Direct Tel: 92-21-38455508URL: www.kamranrahat.webs.com

Operations Management/Production Management

At a Glance

Chapter-1Operations as a

Competitive Weapon(An Introduction to Operations/Production Management for Beginners)

Kamran Rahatwww.kamranrahat.webs.com

MANAGEMENT AND MANAGERIAL FUNCTIONS



Management Defined

Management is “The organization and coordination of the activities of an enterprise in accordance with certain policies and in achievement of defined objectives”. There are four basic functions of Management. These are:-Planning: Planning relates to decisions on about the present and the future. It relates to developing objectives, strategies, policies etc.-Organizing: In this function, managers have to decide the optimum usage of all resources-Staffing: Filling positions in organizational chart, i.e recruitment/selection etc.-Leading: Leading deals with proper communication of goals and plans and motivating the employees to achieve them.-Controlling: Keeping a check on the progress of plans and monitor actual performance.

FUNCTIONAL DEPARTMENTS IN ORGANIZATIONSBasic Functional Departments in any organization may be Finance/Accounting/Internal Audit, Marketing/Sales/Business Development, Operations/Production/ Manufacturing, Human Resources/Personnel.Other Departments may be Procurement/Purchasing/Outsourcing, Engineering, Research and Development (R & D) etc., as per requirement of organization.

TYPES OF ORGANIZATIONS W.R.T BUSINESS

Manufacturing Organizations: They deal in converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications. Manufacturing commonly employs a man-machine setup with division of labor in a large scale production. Example: P & G, Mitsubishi Japan etc.

Assembling Organizations: They usually deal in getting component parts from manufacturers and combine them on assembly lines to get fininshed goods. Example:



Toyota Indus Motor, Karachi, Pakistan imports components of automobiles from Japan and assembles them in Karachi.

Service Organizations: They deal in providing services to their Clients/Customers. Example: Hospitals, Lawyer’s Office, Cellular Networks etc.

Trading Organizations: They deal in goods manufactured or assembled by other organizations. Example: Distributors, Wholesalers, Retailers.Macro Cash and Carry etc.

CORE AND SUPPORT OPERATIONS OF ORGANIZATION

Core Operations of an organization means the types of operations through which an organization primarily achieves its objectives of profitability and/or growth. Support Operations are the operations which are necessary to support and sustain the core operations. Core Operation of PEPSICO is manufacturing/ processing of Foods and Beverages, whereas its Support Operations are HR, Finance, Marketing/Sales and IT.Similarly Core Operation of an Advertising Agency is Marketing, and that of a Recruitment Agency is HRM.

WHAT IS A PROCESS?

A Process is any activity or group of activities that



takes one or more inputs, transforms and adds value to them, and provides one or more outputs for its customers. External Customer is either End User of a company’s product or an Intermediary like Distributor, Wholesaler, and Retailer.Different Sections within an organization are Internal Customers of each other as they all rely each other for different internal inputs and products.

Within an organization, Intra-organizational Relationships develop (i.e Professional Relationships between two or more sections/departments of an organization) in order to achieve organizational objectives.

Process Illustration Showing Inputs and Outputs

Nested ProcessesThe Concept of processes within a process is called Nested Process.



Some Examples of Common Processes

Customer/Patient Processing Operation at a Hospital

An information processing operation at a Commercial Bank

WHAT IS OPERATIONS/PRODUCTION MANAGEMENT (OM/PM)?The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services is called

Nested Processes at a BankNested Processes at a Bank

BANKBANK

OperationsOperations RetailRetail ProductsProducts WholesaleWholesale

Maintain cardsResearch problems

Site analysisOthers

Process depositsCash checks

Safe deposit boxesOthers

Loan documentationReview credit standing

Obtain manager approvalOthers

Prepare reportsAttend meetingsInput funds deals

Others

ATM supportCustomer transactions

Service qualityOthers

Teller line transactionsTrack branch sales

ATM hotlineOthers

Credit applicationsManage retail productsOriginate lease portfolio

Others

Fund managementMarket making spot

Dealer supportOthers

Cash ManagementLoan operations

Trading operationsOthers

DistributionCompliance

FinanceHuman resources

Auto FinanceCards

MortgagesOthers

TradingLoan administration

LeasingOthers



Operations or Production. The management of systems or processes that create goods and/or provide services is called Operations or Production Management. Production not only means manufacturing goods. Services are also produced.

OM/PM Decisions

Strategic Decisions Product/Service Design Process Selection Capacity Planning Facility Location Facility Layout Job Design

Tactical Decisions Quality Control Demand Forecasting Supply Chain Management Production Planning Inventory Control Scheduling

Cross-Functional Nature of OM/PMOM/PM has an impact on all aspects and functional departments of an organization. Thus OM/PM is not an isolated phenomenon as shown in following figure.



GOODS V/S SERVICES



Manufacturing, Assembling and Trading Organizations deal in Goods. No Organization is 100% Goods Organization. And No Organization is 100% Service Organization. The orientation of Goods Organization is more towards goods and less towards services and vice-versa.

The Goods-Services Continuum is shown below:

FRONT OFFICE AND BACKOFFICE OPERATIONSThe study of service operations has led to the development of some useful concepts



in addition to those that have emerged from the study of manufacturing. One such concept is that of the difference between the Front Office and the Back Office Operations. The area in which contact with customers occurs is termed the front office. This primarily involves customer processing operations. The area where there is normally no contact with customers is termed the back office. This may involve information and/or materials processing operations.

TRENDS IN OM/PM Exponential Growth of Service Sector Productivity Issues and Challenges The Internet, e-commerce, and e-business. Management of technology. Globalization & Global Competition Quality, Time and Technology Considerations Management of supply chains. Outsourcing. Agility. Ethical behavior. Workforce Diversity Operations strategy Working with fewer resources Revenue management Process analysis and improvement, and quality improvement Increased regulation and product liability issues Lean production

CONCEPT OF SUPPLY CHAINA Supply Chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to



customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

For a typical Manufacturer, the Backward Side of its Supply Chain consists of Raw Material Suppliers, Component Parts Supplier, and Other Main and Support Services Suppliers like Legal Services, Security Services and Medical Services. And the Forward Side of Supply Chain consists of Distributor, Wholesalers, Retailers, End Users/Consumers etc.

This Supply Chain creates Inter-organizational Relationships i.e Professional Relationship between Supply Chain Members. Failure of one member of supply chain may result in overall supply chain failure.

RESOURCES: DEFINITION AND TYPES

Resources are stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively.

Types of Resources are:Human Resources (Executives and Labour with their Skills and Capabilities)Material Resources (Tangible Consumable Items like Raw Material Inventory)Tool, Machinery, Equipment, Plant (Tangible, Non-Consumable Items)Methods and Procedures, Money and Other Assets

INTRODUCTION TO PRODUCTIVITY



Productivity is the value of Outputs (goods, services, results) produced divided by the values of Inputs (resources). Mathematically it can be shown as:

Productivity = Output / Input

Labour ProductivityOutput per Person or Output per Man-Houreg 50 Cases Processed per Processing Offices, 10 Cases Processed per Man-Hour

Machine ProductivityOutput per Machine or Output per Machine-Houreg 50 Units Produced per Machine, 10 Units Produced per Machine-Hour

Multifactor ProductivityIt is an index of output provided by more than one of the resources (inputs) used in production.

SCOPE OF OPERATIONS/PRODUCTION MANAGEMENT

Other things included in the Scope of OM/PM are:Strategic Considerations, Managing Project Processes, Technology Management, TQM, Statistical Process Control, Facility Layout, Supply Chain, Resource Management, Production Planning/Scheduling

EXERCISE



Q-1: Services are also produced. Do you agree? If yes then briefly elaborate.

Q-2: List down key processes and core operations in following type of organizations:Commercial Bank, Investment Bank, Fast Food Chain, Car Assembling Company, FMCG Distributor.

Q-3: Briefly explain any three points of differentiation between Goods and Services.

Q-4: A typical manufacturing organization deals only in providing goods to its customers, not services. What is your opinion? Justify your answer.

Q-5: How Strong Intra-organizational Relationships can contribute to overall Organizational Productivity and consequently profitability?

Q-6: Use the transformation model (Figure 1.1) to analyze the following types of organization. In each case, list the transformed resources, the transforming resources and the outputs produced.Clothing manufacturer, School, Dentist, Accountancy, Restaurant, Bank

Q-7: List down the Front Office and Back Office Operations in a Mega Departmental Store like Macro Cash and Carry.

introduction to operations management

Business

basic functions of management

requirement of organization

types of operations

trading organizations

service organizations

types of organizations

kamran rahat cells

karachidirect tel