Introduction to Operations Management

Introduction to Operations Management

• Operations management is a business function focused on planning, organizing, coordinating, and controlling resources to produce goods and services.
• It involves multiple departments, including marketing, operations, and finance.
• The role of operations managers includes implementing operations strategy, gaining competitive advantage, and increasing productivity.
• Operations are critical to a business's success, impacting profitability and customer satisfaction.

Agenda

• The agenda covers three parts of operations management:
  • Part 1: Operations management and the role of operations managers (1.20 – 1.45)
  • Part 2: Metrics in Operations (1.45-2.15)
  • Part 3: Capacity Analysis & Activity (2.15-3)

Part 1: The Role of Operations

• Operations management is a vital business function for planning, organizing, coordinating & controlling resources needed to produce a company's goods & services.

What is Operations Management?

• Operations management is a business function that plans, organizes, coordinates, and controls the resources required to produce a company's goods and services.
• Key departments involved include marketing, operations, and finance.
• The President/CEO oversees all departments.
• Operations managers manage people, equipment, technology, materials and information.
• The purpose of operations is to produce goods & services.

Operations at The Heart of The Business

• Operations management (OM) is central to a business.
• OM interacts with other business functions like marketing, IS/IT, and finance.
• Information flows between OM & other departments.

Operations as a Transformation Process

• Operations are a process of transformation.
• Raw Materials (Input) are transformed into finished goods & services (Output).
• Management capital and labor play a significant role in this transformation.

Example of a Value Adding Transformation Process

• A diagram illustrating how individual parts are assembled to create final product.
• Different steps involved in production are shown.

Why Operations Management is Important

• Operations management is crucial.
• It affects factors like sales, cost of goods, gross margin, and finance costs.
• High profit margin areas are the "high hanging fruit" of a business.

Activity: What Do Operations Managers Do?

• Operations managers have three main jobs:
  • Implement operations strategy
  • Achieve competitive advantage
  • Increase productivity

Nine Categories of Operations Management Decisions

• Key decisions in operations management include:
  • Product plans
  • Competitive priorities
  • Positioning strategies
  • Location
  • Technology choices
  • Quality management and control
  • Inventory management
  • Materials management
  • Master production scheduling

Operations Differentiation: 4 Vs

• Volume: Number of products/services.
• Variety: Different types of products/services.
• Variation: Demand fluctuations over time.
• Visibility: Extent of customers' interaction with internal operations.

Manufacturing VS Services

• Manufacturing organizations focus on tangible products.
• Service organizations focus on intangible outcomes.
• Key differences include tangibility, inventorability, customer contact, capital intensity, and response time. Inventory plays a role in manufacturing but not services.

Part 2: Metrics in Operations - Efficiency, Effectiveness & Productivity

• This part focuses on measures used to assess operations effectiveness.
• Effectiveness measures how well a business accomplishes intended goals, while efficiency measures how well it completes operations.

Defining the terms

• Effectiveness - Doing the right things
• Efficiency - Doing the right thing well.
• Productivity - The ratio of outputs (goods & services) to inputs (labor and capital).

Efficiency Versus Effectiveness

• A company can be efficient (well-executed strategy) but not effective (the right strategy)
• Efficiency without effectiveness reduces productivity

Productivity Challenge

• Productivity is the ratio of output to input (goods/services and labor/capital) and is used for process improvement.

Productivity Calculations

• Calculations show how labour productivity is determined.

Productivity Variables

• Key inputs to a business like Labor, Capital, and Management

Multi-Factor & Total Factor Productivity

• Multi-factor productivity considers various inputs including labor, materials, capital.

Productivity Tutorial Activity

• A practical example of productivity calculation

Part 3: Capacity Analysis

• Understanding capacity is key in managing operations.
• Capacity analysis refers to determining and understanding production capacity needs for various business products and processes.

Capacity Definitions

• Theoretical Capacity: Ideal capacity under flawless conditions.
• Normal Capacity: Average-period capacity accommodating a standard mix of products.

Process Times

• Time taken for various business operations.

Capacity Analysis

• Analysis of sandwich production lines shows how to calculate process times, bottleneck points (where processes are slowest) and capacity.

Examples of Capacity Analysis Scenarios

• A variety of scenario examples are provided, showing calculations involving customer service, checkout, and wrapping processes.

Improving Productivity

• Ways to improve productivity include increasing efficiency, expanding input while increasing output, achieving breakthroughs or innovations, and downsizing while maintaining output.