Operations Management: An Overview

Introduction to Operations Management

• Operations management plays a critical role within organizations, focusing on transforming inputs efficiently and effectively into outputs, which include both goods and services.
• It involves planning, organizing, and supervising production processes to ensure resource efficiency and meeting customer requirements.
• The scope extends across manufacturing, services, and international sectors, involving both strategic and daily decision-making for productivity and quality enhancement.
• Operations management is concerned with designing, planning, controlling, and operating an organization's production systems.

Objectives of Operations Management

• To ensure the organization's production systems meet customer demand.
• This involves ensuring business operations are efficient by using minimal resources and effective in meeting customer demand, ultimately improving operations efficiency and effectiveness while reducing costs.
• To maximize the efficiency of the organization's production systems.
• There are various tools and techniques operations managers use, like process improvement and quality control methods.
• To minimize the cost of producing goods and services.
• This should still maintain high levels of quality and customer satisfaction, often achieved by streamlining production processes and eliminating waste.
• Improving efficiency and productivity helps keep costs low.
• To improve the quality of goods and services, which can be achieved by:
• Improving production process efficiency.
• Ensuring products meet customer specifications.
• Reducing waste and defects.
• Improving quality boosts customer satisfaction and loyalty, leading to higher sales and profits.
• To increase the flexibility of the organization's production systems.
• This is done to improve the responsiveness to market demands and adaptability to changes, potentially through introducing new technologies or revising processes.
• To reduce risks of disruptions to the organization's production systems
• Ensuring necessary resources are available, processes run smoothly mitigate risks
• To improve communication and coordination among all parties involved, including managers, employees, suppliers, and customers.

Scope of Operations Management

• It is the process of planning, organizing, directing, and controlling resources for producing goods and services.
• It includes all activities necessary to plan, design, and manage production and distribution.
• Facility layout planning to optimize workflow in a factory or office.
• Workforce planning and management includes ensuring adequate employees with the proper skills and managing employee performance.
• Inventory management encompasses managing all materials from raw to finished, maintaining optimal inventory levels.
• Scheduling creating a customer demand production schedule while maximizing efficiency.
• Quality control ensures products meet customer expectations and standards.
• Transportation and logistics involves planning efficient movement of goods from suppliers to customers.
• Maintenance is required to keep equipment and facilities running smoothly.
• Project management ensures operations are completed timely and within budget.

Components of Operations Management

• Forecasting is critical for organizations to make informed decisions about future production needs and capacity requirements.
• Key elements to consider include;
• Product or service type being produced
• Underlying demand
• Lead time
• Production variability
• Desired inventory level
• An effective forecasting system will account for all of the above

Total Quality Management

• Its a strategic approach to improving competitiveness.
• It emphasizes continuous advancement in all aspects to provide customers with products and services that meet or exceed expectations.

Basic Components of TQM

• Quality planning involves setting objectives, goals, & development plans to achieve them.
• Quality control is monitoring and measuring the quality of products and services ensuring they meet desired levels and corrective action is taken when necessary.
• Quality assurance entails procedures and processes to prevent defects.
• Quality improvement is continual efforts to identify and remove defects to improve quality levels.

Materials Requirement Planning

• Materials requirement planning (MRP) involves planning the timing of production activities to ensure materials are available when needed.
• It's necessary for manufacturing processes needing raw materials with supplier lead times.
• MRP systems keep track of a master schedule, inventory records, and the bill of materials.
• Master schedule indicates when each finished product is due.
• Inventory records show how much material is on hand and where it is located.
• Bill of materials list all raw materials and subassemblies required.
• MRP systems generate schedules for purchasing raw and producing finished products.
• Schedules consider lead times and minimum order quantities, generating rescheduling messages for delays.

Just in Time

• Just In Time (JIT) is a manufacturing philosophy that arose in the 1970s to eliminate waste from the production process by producing only what is needed.
• It helps businesses operate efficiently and cut costs.

The four key principles of JIT

• Produce only what is needed.
• Produce only what is demanded.
• Do not overproduce or keep excessive inventory on hand.
• Streamline the production process to minimize waste and maximize efficiency.
• Properly implemented JIT results in cost savings, improved quality, customer satisfaction, reduced lead times, increased flexibility, and reduced inventories.
• Inventory Management is the process of tracking inventory levels and making decisions about acceptable levels to achieve balance
• Balance is needed in order to avoid high costs (cash and obsolescence), but enough to avoid (stockout and lost sales)
• Inventory management is a critical component of operations encompassing all actives including procurement, warehousing, transport, and customer service.
• An effective system considers physical(actual goods) and financials (costs associated with procuring, storing, and transporting)

Components of Effective Inventory Management

• A clear understanding of customer demand and forecasting future demand to maintain necessary inventory.
• An efficient procurement process for ordering the right products from suppliers in the right quantities and at the right time.
• And effective warehousing strategy should minimize damage, loss, and theft while maximizing space.
• A well-designed transportation network should ensure finished goods are delivered on time in good condition.

Importance of Operations Management in Business

• Operations management is important in a business because of its impact on goods/services managed.
• In health it ensures proper health delivery with the needed tools.
• In production and manufacturing it makes goods available.
• Operations Management is widely used for regardless the size of company.

Evolution of Operations Management

• Operations management began in the eighteenth century as manufacturing management with specialization of labor.
• Adam Smith developed the theory of labor specialization in 1776.
• Cost accounting was developed in 1799 by Eli Whitney.
• Charles Babbage developed the division of labor and assigning of tasks based on skills and time management in 1932.
• Frederick Taylor developed planning and work performance in 1900 and Frank Gilbert studied jobs.
• Henry Gantt developed techniques for work scheduling and manufacturing jobs in 1901. F.W. Harris developed inventory for economic controls in 1915. Elton Mayo developed the human relations department in 1927.
• W.A. Shewhart used statistical information for quality control in 1931.
• H.F Dodge and H.F. Roming sampling techniques in 1935.
• P.M. Blacker and their group applied operations in the world war.
• John Mauchlly & J.P. Eckert developed digital computers and after them G.B. Dantzig and William developed software for programming.
• A. Charnes and W. Cooper linear mathematical programming. Sperry Univak data computation, L. Cummings and L. Porter studies the people at work.

Operations Management Contributions

• W. Skinner and J. Orlicky incorporation, G. Wright computers in manufacturing, W.E. Deming quality productiivity.
• Production management was used up to 1950s.
• From there the field grew and became "operations management", emphasis was put upon expasion of manufacturing.
• Businesses operations, and manufacturing, became more orginized, and have ensured efficiency while retaining quality.
• Manufacturers classify productions leading to quantity productions.
• JobShop made it possible for variety of products.
• One of the major impacts of operations management is mass production.

Impacts of Operations Management

• Development has led to positive impacts on mass production, cost effective.
• Through operations there is mass production, and customer requirments are met.
• Businesses have seen business improvements due to more organized internal production and development.
• Planning activities has also helped businesses to set goals and objectives.
• With competition, there is more efficient and organized delivery of goods.

Seven Main Functions of Operations Management

• Product design is the process of conceptualizing, creating, and iterating on products to to meet specifications and capabilities, it is the link from market to business. Considerations can include:
• User needs and preferences
• Market trends
• Technological capabilities
• Manufacturing processes
• Cost constraints
• Environmental impact
• Quality Management is guaranteeing products meet or exceed customer expectations.
• Includes; Planning, control, assurance and improvement.
• Process Design & Layout focuses physical arrangement of production facilities and workflow to maximize efficency.
• Supply Chain Management coordinates the flow of goods, information & finances from supplier to customer.
• Inventory Management involves balance stock levels to meet demand to prevent lost value.
• Scheduling is the time/resource allocations and sequencing to optimize efficiency and meeting deadlines.
• Maintence that prevents and maintains breakdowns while extending equipment.

Role of Operations Management in Delivering Values to Customers

• Increasing productivity, communications with employee buy in.
• Cost efficiency is the money management and resources from spending high to efficient production and sales.
• Competitive advantage is the edge an organization has providing its goods/service
• Ensure employee satisfaction to maintain customer loyalty
• Operations managers increase customer satisfaction and good communication and collaboration between employees.

Key Concepts and Terminology

• Business Efficiency refers to maximizing the time, effort and resources. Efficient operations take fewer resources to deliver similar or increased results, reducing costs.
• Business effectiveness references to the output, but it produces revenue and provides revenue

Processes

• Input-process-output (IPO)- visual tool to describe a workflow, the flow of information, or activities within a system, allows identification of all factors.
• IPO:inputs processes,outputs left to right columns.
• Process maps and flowcharts are both procedures/workflows, but are not interchangeable and have own attributes suited for certain situations.
• Process maps provide a sequenced represantation of how input effects locations can effect manufacturing and quality management.
• Flowcharts are more general and help identify different sections.