Dr.

Rameez Khalid, PMP, CQSSBB

Faculty, Department of Management
Institute of Business Administration, Karachi
Operations Management
Operations Management is:
The management of systems or processes
that create goods and/or provide services

Operations Management affects:
Companies ability to compete
Nations ability to compete internationally
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 2
The Organization
Three Basic Functions
Organization
Finance Operations Marketing
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 3
Value-Added Process
The operations function involves the conversion of
inputs into outputs
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Control
Feedback
Feedback Feedback
Value added
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Value-Added & Product Packages
Value-added is the difference between the cost of
inputs and the value or price of outputs.
Product packages are a combination of goods and
services.
Product packages can make a company more
competitive.
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Automobile assembly, steel making
Home remodeling, retail sales
Automobile Repair, fast food
Goods-service Continuum
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
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Hospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patients
Hospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 7
Manufacturing or Service?
Tangible
Act
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Tangible product
Consistent product
definition
Production usually
separate from
consumption
Can be inventoried
Low customer
interaction
Characteristics of Goods
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Intangible product
Produced and consumed
at same time
Often unique
High customer interaction
Inconsistent product
definition
Often knowledge-based
Characteristics of Service
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Goods Vs. Service
Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
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Operations Management includes:
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
Supply chain management
And more . . .
Scope of Operations Management
Example:
Airline
Company
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 13
Year Mfg. Service
45 79 21
50 72 28
55 72 28
60 68 32
65 64 36
70 64 36
75 58 42
80 44 46
85 43 57
90 35 65
95 25 75
00 30 70
02 25 75
U.S. Manuf acturing vs. Service Employment
0
10
20
30
40
50
60
70
80
90
45 50 55 60 65 70 75 80 85 90 95 00 02 05
Year
P
e
r
c
e
n
t
Mfg.
Service
Manufacturing Vs. Service Jobs
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Decline in Manufacturing Jobs
Productivity
Increasing productivity allows companies to
maintain or increase their output using fewer
workers
Outsourcing
Some manufacturing work has been outsourced
to more productive companies

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Operations Management
Decision Making
Models
Quantitative approaches
Analysis of trade-offs
Systems approach
Establishing priorities
Ethics

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1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply chain management
8. Inventory management
9. Scheduling
10.Maintenance
Ten Critical Decisions
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 18
Models
A model is an abstraction of reality.

Physical

Schematic

Mathematical
What are the pros and cons of models?
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 19
Models Are Beneficial
Easy to use, less expensive
Require users to organize
Increase understanding of the problem
Enable what if questions
Consistent tool for evaluation and
standardized format
Power of mathematics

Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 20
Limitations of Models
Quantitative information may be emphasized over
qualitative
Models may be incorrectly applied and results
misinterpreted
Nonqualified users may not comprehend the rules on
how to use the model
Use of models does not guarantee good decisions

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Quantitative Approaches
Linear programming
Queuing Techniques
Inventory models
Project models
Statistical models
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Analysis of Trade-Offs
Decision on the amount of inventory to stock
Increased cost of holding inventory
Vs.
Level of customer service
While purchasing an equipment, evaluate the merits
of extra features relative to their cost
Tradeoffs
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Systems Approach
System: Set of interrelated parts that must work together
System consists of subsystems
Impact of changes must be evaluated for all parts of the
system
Synergy: Whole is greater than the sum of the parts.
Big Picture
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Pareto Phenomenon
A few factors account for a high percentage of
the occurrence of some event(s).
80/20 Rule - 80% of problems are caused by
20% of the activities.
How do we identify the vital few?
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Ethical Issues
Financial statements
Worker safety
Product safety
Quality
Environment
Community
Hiring/firing workers
Closing facilities
Workers rights
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Operations Interfaces
Public
Relations
Accounting
Industrial
Engineering
Maintenance
Personnel
Purchasing
Distribution
MIS
Legal
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Historical Evolution of
Operations Management
Industrial revolution (1770s)
Scientific management (1911)
Mass production
Interchangeable parts
Division of labor
Human relations movement (1920-60)
Decision models (1915, 1960-70s)
Influence of Japanese manufacturers
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 29
Management of Technology
Technology: The application of scientific
discoveries to the development and improvement
of goods and services
Product and service technology
Process technology
Information technology
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REFERENCES


Operations Management
William J . Stevenson

Operations Management
Barry Render & J ay Heizer
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