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Introduction to Operations Management (MGT345)

Chapter outline:
1.1 1.2 1.3 Introduction to operations managements Objectives Operations Management (OM) Characteristics of Service & Manufactured Products Operations Model


Fundamentals of operations management will be discussed in this chapter. It is the most important process to be considered to any profit oriented or non profit oriented company to make sure their investment worth. Operation activities not only required in product manufacturing but also in service activities.

Terms In Operations Management

There are several terms in operations such as: a) Product- Also known as output. It is either product or service produce by any businesses. Most of the companies consider as final output as either product or service. b) Production/Operations- It is creation of products or service and also called transformation process. c) Operations management- According to Heizer and Render (2011)operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.

Roles of Operations Manager

a) Performs the basic functions of the management process: planning, organizing, staffing, directing and controlling b) Ability to make good decisions, allocate resources effectively and make efficient operations functions.


There are a few objectives in operation:

a) Products or services must meet specific quality standard at a minimum cost. Example: Reduced manufacturing cost to gain more profit. b) Fully utilize of labor, equipment and material. Efficiency use all resources. Example: proper use of resource can minimize wastage. c) To enhance productivity through efficiency by increased output produced and less input used. Example: with minimum input can produce maximum output.

d) To achieve customer satisfaction by produce good quality product or service. Example: good quality at reasonable price. e) To reach customer at the right time, quantity and location. Example: avoid product shortages and on times delivery. f) To be effective and efficient manufacturer. Example: to meet customer satisfaction and to maximum the output. g) To survive in the long term. Example: flexible production and able to compete within industry and ability to respond rapidly to changes in product design or process design.


Intangible output that cannot be touched (Example: hotel service) Output cannot be inventoried at real time (Example: service) Extensive customer contact and involvement (Example: boarding an airplane) Short lead times Service may need to delivered immediately when customer wants to service. (Example: speedy service)

Tangible product that can be seen and touch must be delivered to customers (Example: clothing) Output can be inventoried and produce in advance (Example: stock) Little customer contact (Example: no intervention during manufacturing process) Long lead times It may takes several days or weeks to manufacture goods. (Example: order for car)

Labor Intensive (Example: Check In)

Service quality is subjective

Capital intensive and highly manufacture goods (Example: robots)

Product quality is objective

1.4 Operations System

Operation system model (OSM) is a process of transformation input to output. OSM has 4 major components which is input transformation process, final output and feedback.


Transformation Feedback


Land Labour Capital Management

Manufacturing Transportation Retailing Warehousing Telecommunication

Goods Services

Example of Operation System

COMPONENTS Input It is raw material needed for production or operation. It is also important ingredients in operation system. Consists of manpower, machine, material, money, equipment Transformation process It is a process of convert input into output. Conversion system by adding less value input to become valuable output. Factors affecting are capacity, efficiency, effectiveness, flexibility Painting, test drive, assembly parts in a automobile factory. Online ticketing, safety instructions, surgical procedures in a hospital Screws, Mirrors, Car body Pilot, Doctor, Flight attendance EXAMPLE OF PRODUCT EXAMPLE OF SERVICE

OUTPUT End result of production product or service. It is final production stage. Also called a product or service FEEDBACK Act as control mechanism Car model performance, for operation system. It is customer complaints also to measure performance of product or service. Services offer, Customer complaints

The input, transformation process and output of various operation system.


Student Academician/ admin/supporting staff Classroom/lab lib Patients Doctors Medical facilities Aircraft Pilot Passengers Foodstuff Cooking utensils Engine Transmission system Body panels tires

Lecturer imparting knowledge Student sitting for an examination



Surgical procedures Administering medication Air transportation

Healthy people/dead


Passengers arriving t their destination Satisfied customer


Order taking Cooking Serving customer Fabrication & assembly of parts and components

Automobile factory

Finished cars

End of Chapter 1