Study Notes on Operations Management

Operations Management Overview

• Copyright Information:
  • Copyright © 2025, 2022, 2019 Pearson Education, Inc. All Rights Reserved

Learning Goals

1. Describe the Role of Operations

   • Understand the historical evolution of operations in organizations.

2. Process View of Operations

   • Analyze inputs, processes, outputs, information flows, suppliers, and customers.

3. Supply Chain View of Operations

   • Examine the linkages between core and support processes in operations.

4. Latest Trends in Operations Management

   • Identify current trends and challenges faced by operations and supply chain managers.

5. Fourth Industrial Revolution (Industry 4.0)

   • Define and understand how embedded technologies and automation are transforming operations and supply chain management.

6. Developing Skills for Your Career

   • Explore how to utilize this textbook to develop relevant skills.

Operations Management Definitions

• Operations Management:

  • The systematic design, direction, and control of processes that transform inputs into services and products for both internal and external customers.
  • Example: Mini Cooper Assembly.

• Process:

  • Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.
  • Organizationally, processes are clustered into Operations.

• Operation:

  • A group of resources performing all or part of one or more processes.

• Supply Chain:

  • An interrelated series of processes within and between firms that produces a service or product to satisfy customer needs.

• Supply Chain Management:

  • The synchronization of a firm’s processes with those of its suppliers and customers, ensuring that the flow of materials, services, and information matches customer demand.
  • Note: Lack of synchronization may lead to overproduction or shortages.

Role of Operations in an Organization

• Operations and Supply Chain Management are critical components of any organization.

  • Proficiency in these principles is essential for career advancement.

• In manufacturing firms, the head of Operations typically holds the title of COO (Chief Operations Officer) or Vice President of Manufacturing.

• In service organizations, this role is often titled Vice President of Operations.

How Processes Work

• Responsibility of Operation Managers:
  • Involvement in all facets of running an organization.
  • Translate materials and inputs into goods/services.
  • Manage process design effectively for cost-efficiency while ensuring customer satisfaction.

Customer Relationships in Processes

• All organizational processes have customers:

  • External Customers: External parties that receive the outputs.
  • Internal Customers: Departments or individuals within the organization that depend on outputs.

• Each process relies on suppliers:

  • External Suppliers: Entities outside the organization providing inputs.
  • Internal Suppliers: Departments within the organization providing necessary resources.

Inputs and Outputs Examples

• Jewelry Store Inputs: Merchandise, store building, registers, jeweler, customers.
  • Outputs: Services offered and sold merchandise.
• Blue Jeans Factory Inputs: Denim, machines, plant, workers, outside services.
  • Outputs: Clothing and associated support services.

Nested Processes

• Definition and Explanation:

  • A process can contain subprocesses that can be further decomposed.
  • This structure is referred to as a nested process.

• Importance:

  • Encourages collaboration and effective task allocation among skilled personnel.
  • Example: Metal Component Fabrication where machining operations may be outsourced.

Service vs. Manufacturing Processes

• Manufacturing Process Characteristics:

  • Physical, durable output
  • Convertible into inventory
  • Low customer contact
  • Long response time
  • Capital intensive
  • Quality is easily measured

• Service Process Characteristics:

  • Intangible, perishable output
  • Not inventoried
  • High customer contact
  • Short response time
  • Labor intensive
  • Quality is not easily quantifiable

• Overlap Between Processes:

  • Example: Dining experience at a restaurant blends meal service and consumer interaction.

Supply Chain View

• Core Processes

  • Set of activities delivering value to external customers.
  • Involve direct interactions with customers and suppliers.
  • Objective: Ensure each process adds value and eliminates waste.

• Key Supply Chain Processes:

  1. Supplier Relationship Process:
     • Selecting suppliers and streamlining material flow.
  2. New Service/Product Development:
     • Designing services/products based on customer feedback and market analysis.
  3. Order Fulfillment Process:
     • Activities to deliver services/products to customers.
  4. Customer Relationship Process:
     • Building rapport with customers and facilitating order placements.

Support Processes

• Essential processes that provide resources to core processes, including:
  • Accounting: Tracks financial performance.
  • Human Resources: Manages recruitment and training.
  • Management Information Systems: Processes data for decision making.

Supply Chain Processes Defined

• Business Processes:

  • Characterized by interactions with external customers or suppliers.

• Examples of Supply Chain Processes:

  • Outsourcing: Seeking suppliers for procurement.
  • Warehousing: Inventory receipt and quality verification.
  • Sourcing: Evaluating suppliers and managing contracts.
  • Customer Service: Addressing inquiries and resolving issues.
  • Logistics: Overseeing transportation and inventory management.
  • Cross-docking: Minimizing storage time for incoming products.

Measuring Productivity

• Definition:
  • Productivity is defined as the ratio of output to input efficiency.
• Key Measurement:
  • Basic measurement for performance across industries and organizations.

Productivity Calculation Example

• Example 1.1

  1. Scenario: Three employees process 600 insurance policies in a week.
  2. Calculation:
  • Labor Productivity = Policies Processed / Employee Hours
  • Policies Processed = 600, Employee Hours = (3 employees)(40 hours/employee)
  • Result: Labor productivity = 5 policies/hour.

• Example 1.1 (b)

  • Value of output and calculations for assessing multifactor productivity.

Trends and Challenges in Operations Management

• Post-COVID-19 Impacts:

  • Shift to remote work environments, supply shortages, and inflation challenges.

• Workforce Diversity, Equity, Inclusion, and Ethics

  • Focus on sustainability to meet current needs without compromising future generations.

• Humanitarian Logistics:

  • Managing logistics efficiently to alleviate suffering in vulnerable populations.

Fourth Industrial Revolution (Industry 4.0)

• Definition:

  • Ongoing automation of traditional manufacturing via modern smart technologies including:
  • Smart manufacturing technologies
  • Smart products technologies
  • Smart supply technologies
  • Base technologies

• Emerging Technologies:

  • Manufacturing Execution Systems (MES): Track and optimize production efforts.
  • Artificial Intelligence (AI): Technologies allowing machines to learn and act autonomously.
  • Internet of Things (IOT): Interconnectivity enabling data exchange between networked objects.
  • Additive Manufacturing (AM): 3D printing technologies using layers of materials.

Developing Skills for Your Career

• Focus on adding value through process innovation.

  • Each organization segment should design operational processes related to supply chain management.

• Case Study: Student tuition and calculations for cost-effectiveness and productivity ratios in educational settings.

Example Calculations in Higher Education

• Multifactor Productivity:
  • Example from Boehring University provided.