Introduction to Operations Management

• Introduction to Operations Management by Engr. Gilda A. Aquino, MSIE for City College of Calamba.

What are Operations?

• Operations are the part of a business organization responsible for producing goods and/or services.
• Goods are physical items produced by business organizations.
• Services are activities providing a combination of time, location, form, and psychological value.

The Three Basic Functions of a Business Organization

• Organization is the head
• Finance is the 1st function of a business organization
• Operations is the 2nd function of a business organization
• Marketing is the 3rd function of a business organization

The importance of Economic Balance

• An ideal situation for a business organization is achieving an economic match of supply and demand.
• Excess supply or excess capacity is wasteful and costly.
• Too little supply leads to lost opportunities and customer dissatisfaction.
• Operations and supply chains are key functions on the supply side.
• Sales and marketing are key functions on the demand side.

Finance Explained

• Finance secures financial resources at favorable prices and allocates them throughout the organization.
• It also involves budgeting, analyzing investment proposals, and providing funds for operations.

Marketing Explained

• Marketing assesses consumer wants and needs, and sells and promotes the organization's goods or services.
• It also allocates resources throughout the organization, budgeting, analyzing investment proposals, and providing funds for operations.

Operations Explained

• Operations produces goods or provides services offered by the organization.
• Operations management involves managing systems or processes that create goods and/or provide services.

Business Operations Overlap

• Operations are at the top
• Finance is on the left
• Marketing is on the right

Finance and Operations Cooperation

• Finance and operations management personnel cooperate by exchanging information and expertise.
• Budgeting involves preparing budgets periodically to plan financial requirements.
• Budgets may be adjusted, and performance relative to a budget needs evaluation.
• Economic analysis of investment proposals involves evaluating alternative investments, requiring input from both operations and finance.
• Provision of funds entails the necessary funding of operations.
• The amount and timing of funding is critical, with careful planning helping avoid cash-flow problems.

Marketing's Roles

• Marketing focuses on selling and/or promoting the goods or services of an organization.
• Marketing is also responsible for assessing customer wants and needs.
• Marketing is responsible for communicating those needs to operations people (short term) and to design people (long term).

Marketing, Design, and Production

• Marketing, design, and production must work together to implement design changes and to develop new products.
• Marketing provides valuable insight into competitors.
• Marketing supplies information on consumer preferences for product design and features.
• Operations provide information about capacities and judge the manufacturability of designs.

Operations and Finance Communication

• Operations gives warnings if new equipment or skills are needed for new products or services.
• Finance people are included in exchanges to provide information on available funds (short term).
• They also learn what funds might be needed for new products or services (intermediate to long term).

Interdepartmental Interfaces

• Marketing, Operations, and Finance must interface on product and process design, forecasting, setting realistic schedules, quality, and quantity.
• They also keep each other informed on strengths and weaknesses.

Operation Interfaces

• Accounting
• Legal
• Public relations
• Personnel/Human resources
• MIS

Departmental Functions

• The legal department consults on contracts with employees, customers, suppliers, and transporters, as well as on liability and environmental issues.
• Accounting supplies information on costs of labor, materials, and overhead, and may provide reports on items such as scrap, downtime, and inventories.
• Management information Systems (MIS) provides management with the needed information to effectively manage.
• This occurs by designing systems to capture relevant information, designing reports.
• MIS is also important for managing the control and decision-making tools used in operations management.
• Personnel/Human resources deals with recruitment and training, labor relations, contract negotiations, wage and salary administration, manpower projections, and employee health and safety.
• Public relations has responsibility for building and maintaining a positive public image of the organization, providing benefits such as marketplace advantages and encouraging a positive attitude among employees.

Process Management

• A process consists of one or more actions that transform inputs into outputs.
• The central role of management is process management.

Three Categories of Business Processes

• Upper-management processes govern the operation of the entire organization, like organizational governance and strategy.
• Operational processes are core processes that make up the value stream, like purchasing, production/service, marketing, and sales.
• Supporting processes support core processes and include accounting, human resources, and information technology.

Scope of Operations Management

• Forecasting includes weather and landing conditions, seat demand for flights, and air travel growth.
• Capacity planning is essential to maintain cash flow and make a profit
• Locating facilities is according to managers' decisions.
• It is important to consider which cities to provide service for, where to locate maintenance facilities, and where to locate major and minor hubs.
• Facilities and layout are important in achieving effective use of workers and equipment.
• Scheduling of planes for flights and maintenance, also pilots, flight attendants, ground crews, counter staff, and baggage handlers are relevant.
• Managing inventories include foods, beverages, first-aid, magazines, pillows, blankets, and life preservers.
• Assuring quality is essential in flying and maintenance operations, especially safety.
• It is also important in dealing with customers on reservation, check-in through telephone, and electronic reservations.
• Motivating and training employees should be done in all phases of operations.