Section Seven – Operations
Management
Learning Objectives
Understand the history of operations management
Define Operations management
Discuss the importance of operations management
Understand the duties and functions of operations managers
Understand the relationship between operations and productivity
Identify new trends and topical issues around
Operations Management as an evolving management field.
Identify the different challenges that an operations manager
encounters with the ever evolving field of Operations
Management
Discuss operations in the service sector
Distinguish between goods and services
Understand the difference between productivity and production
Discuss the factors affecting productivity
Explain how productivity may be improved
What is operations management
Operations management is the set of activities that creates
goods and services through the transformation of inputs
into outputs.
The history of operations
management
Eli Whitney (1800) is credited for the early popularisation of
interchangeable parts, which he achieved through standardization
and quality control in manufacturing.
Frederick W Taylor (1881), known as the father of scientific
management, contributed to personnel selection, planning and
scheduling , motion study and the now popular field of
ergonomics (way to work smarter not harder).
Henry Ford and Charles Sorensen (1913), combined what they
knew about standardized parts with the quasi-assembly lines of
the meatpacking and mail-order industries and added the
revolutionary concept of the assembly line where men stood still
and material moved.
The history of operations
management
Division of labour (Adam Smith, 1776, and Charles Babbage,
1852)
Standardardized parts (Whitney, 1800)
Scientific management (Taylor, 1881)
Coordinated assembly line (Ford /Sorensen/Avery, 1913)
Gantt charts (Gantt, 1916)
Time and Motion study (Frank & Lillian Gilbreth, 1922)
Quality control (Shewhart, 1924; Deming, 1950)
Computer (Atanasoff, 1938)
CPM/PERT (DuPont, 1957)
Material requirements planning (Orlicky, 1960)
Computer - aided design (CAD, 1970)
Flexible mfg.system (FMS, 1975)
Baldrige Quality Awards (1982)
Computer integrated mfg (CIM, 1990)
Globalization (1992)
Internet (1995
CHALLENGES OPERATIONS
MANAGERS FACED WITH
• GLOBAL FOCUS – rapid decline in communication and
transportation costs has made global markets more accessible.
Materials, talent and labour have also gone global.
Contributing to this rapid globalization are countries
throughout the world that are vying for economic growth and
industrialization.
Operations managers are responding with innovations that
generate and move ideas, parts, and finished goods rapidly,
wherever and whenever needed.
• JUST IN TIME PERFORMANCE – vast financial resources are
committed to inventory. Inventory impedes the response of
dynamic changes in the marketplace.
Operations managers are responding by slashing inventories
at every level, from raw materials to finished goods.
• SUPPLY-CHAIN PARTNERING shorter product life cycles, as
well as rapid changes in material and process technology,
require more participation by suppliers. Suppliers usually
supply up to 80% of the value of products.
Consequently, operations managers are building long-term
partnerships with critical players in the supply chain.
CHALLENGES OPERATIONS
MANAGERS FACED WITH
• RAPID PRODUCT DEVELOPMENT – rapid international
communications of news, entertainment, and lifestyles is
dramatically chopping away at the life of products Operations
managers are responding with design technology that is faster
and design management that is more effective.
• MASS CUSTOMIZATION – once we begin to consider the world
as the marketplace, then the individual differences become
quite obvious. Cultural differences, in a world where
consumers are increasingly aware of options, places
substantial pressure on firms to respond.
Operations managers are responding with production
processes that are flexible enough to cater to individual whims
of consumers. The goal is to produce individual products,
whenever and wherever needed.
• EMPOWERED EMPLOYEES – more sophisticated employees
and a more technical workplace have combined to require
more competence at the workplace.
Operations managers are responding by moving more decision
making to the individual worker.
Operations and Productivity
There is a strong inter-relationship between the
four major functions within an organisation.
Marketing, which generates the demand
Production/operations which creates the
product
Finance which tracks how well the organisation
is doing
Human Resource management which attempts
to motivate employees.
Operations in the service sector
The service sector is defined differently by different people.
However, we will define services as including repair and
maintenance, government, food and lodging, transportation,
insurance, trade, finance, Real Estate, education, legal, medical,
entertainment, and other professional occupations.
Differences between goods and services
• Goods are tangible whereas services are intangible
• Customers participate in many service processes, activities and
transactions
• The demand for services is more difficult to predict than the
demand for goods
• Services can not be stored as physical inventory
• Service management skills are paramount to a successful
service encounter
• Service facilities typically need to be in close proximity to the
customer
• Patents do not protect services
Difference between productivity and production
Productivity is an average measure of the efficiency of production.
It can be expressed as the ratio of output to inputs used in the
production process, i.e. output per unit of input. When all
outputs and inputs are included in the productivity measure it
is called total productivity.
Improving productivity
• Develop productivity measures for all
operations; measurement is the first step in
managing and controlling an operation.
• Consider the system as a whole in deciding
which operations to concentrate on. Find
bottleneck operations in the system and try to
improve the.
• Develop methods for achieving productivity
improvements such as getting ideas from the
workers
• Establish reasonable goals for improvement
• Obtain support of top management
• Measure improvements and publicize them
Revision Questions
Explain the duties and functions
of operations managers
Explain the difference between
goods and services
How would you improve
productivity in your
organisation?
End of Chapter
