Stevenson, William J. Operations Management. Boston: McGraw-Hill Irwin, 2009.

Stevenson, William J. Operations Management. Boston: McGraw-Hill Irwin, 2009.

1  INTRODUCTION TO OPERATIONS MANAGEMENT

What is Operations Management ?

• Operations:  the part of a business organization responsible for producing goods or services
•  Production: the transformation process that converts inputs to outputs
•  Production and operations management: design, operation and improvement of an organization’s production system

According to the MIT Sloan school of Management:

“Operations Management deals with the design and management of products, processes, services and

supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want.”

- Strategic level: eg. location of manufacturing plants

- Tactical level: eg. plant layout and structure

- Operational level: eg. inventory management

STRATEGY

•  Mission/Vision: The reason for existence for an organization

•  Mission Statement: Answers the question “What business are we in?”

•  Goals: Provide detail and scope of mission

•  Strategies: Plans for achieving organizational goals

•  Tactics: The methods and actions taken to accomplish strategies

Strategy Example

Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably.

Mission:                     Live a good life

•  Goal:                     Successful career, good income

•  Strategy:                  Obtain a college education

•  Tactics:                      Select a college and a major

•  Operations:                    Register, buy books, take courses, study, graduate, get job

Operations Management

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EXEMPLE: WHERE TO GO TO LUNCH?

The consumer wants:

• Get the sandwich quickly = time
• Variety (big menu, customized…) = ability to respond to a heterogeneous public
• Quality (environment, staff, hygiene, tastiness of food…): conformance vs. performance
• Price  

EXAMPLE: EMERGENCY ROOM

The consumer wants:

- To be examined quickly = time

- Variety of services (receive appropriate care) = ability

to respond to a heterogeneous public

- Quality (care, personnel, hygiene, noise level…):

conformance vs. performance

- Price

FOUR DIMENSIONS OF PERFORMANCE

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EXAMPLE OF US AIRLINE INDUSTRY IN 1996

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EXAMPLE OF US AIRLINE INDUSTRY IN 2011

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THE EFFICIENT FRONTIER AND TRADE-OFFS

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SCOPE OF OPERATIONS MANAGEMENT

Objective to increase quality, efficiency, and responsiveness (time, variety) of the firm to provide a competitive advantage

-  Plan strategic decisions: Where to locate the factory?

-  Coordinate operations: How much finished goods inventory to keep?

-  Control: Frequency of quality control and maintenance?

COMPETITIVENESS

• How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
• Organizations compete through some combination of their operations and other functions (eg. Marketing, finance…)

• Cost
• Quality
• Flexibility
• Supply chain management
• Location
• …

QUALITY

How well a product does what the customer expects

- Internal view: within the organization

- External view: value customers expect

•  Value: the relationship between quality and price

VALUE = Performance / Cost

EFFICIENCY

• Same number of outputs for fewer inputs and/or costs
• Value-added: the difference between the cost of inputs and the value or price of outputs (greater effectiveness = more value-added)

RESPONSIVENESS

• Product flexibility: speed with which products are created, ability to customize, ability to modify

products for special needs

• Volume flexibility: ability to respond to sudden changes in demand, change from small to full scale
• Process flexibility: ability to manufacture a variety of goods in a short time, adjust to product mix over time, ability to accommodate changes in raw materials

MICHAEL PORTER

Competitiveness can be gained either through:

• Cost competitiveness or
• Differentiation (timeliness, variety, Quality)

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2 PRODUCTIVITY AND PROCESS ANALYSIS

PRODUCTIVITY

Productivity  🡪 a measure of the effective use of resources, usually expressed as the ratio of output to input

Productivity ratios are used for :

- Planning workforce requirements

- Scheduling equipment

- Financial analysis

PRODUCTIVITY

• Partial measures: output/(single input) 
• Multifactor measures: output/ multiple inputs 
• Total measure : output/ total inputs 

• PRODUCTIVITY : OUTPUTS/INPUTS 

MEASURES OF PRODUCTIVITY

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