INTRODUCTION

TO
OPERATIONS
MANAGEMENT

PRODUCTS VERSUS
SERVICES
PRODUCTS Goods or commodities that
have tangible form
Ex:
Books, computers, Machines

SERVICES - Intangible commodities that do

not have a physical form
Ex:
Banking, Hospitalization,
Insurance

PRODUCTS VERSUS
SERVICES

All industries may be treated as service

industries, some more than others

MANUFACTURING COMPANIES
They dont just sell products but also provide
some back-up such as after sales service,
warranty, repair, installation and training
Ex: Cars, computers, Plant & machinery

PRODUCTS VERSUS
SERVICES
SERVICE INDUSTRIES

Purely service industries also have products

which changes hands
Ex:Banks have loan & deposit schemes, ,
Hospitals provide diagnoses, and
prescription & reports,
Educational Institutes provides degrees
Consultants provide Analysis & reports

Goods and Services

Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management

Consulting service/
teaching
Counseling
100%

75

50

25

25

50

75

100%

Percent of Product that is a Good

Percent of Product that is a Service

PRODUCTS VERSUS
SERVICES

In manufacturing the end product is tangible

and identifiable
It is a result of series of transformation
processes applied to it

Ex: When we buy a T.V, we are not

concerned how it is manufactured but
instead in the features that it offers

PRODUCTS VERSUS
SERVICES
In services the end product is in-tangible but
real
Ex: Hospitality at a hotel, Quality education at
an institute
It is the customer that has been processed
So in fact all types of industries are hybrid in
nature: they offer products as well as
services

PRODUCTS VERSUS
SERVICES
Manufacturing industries have a product
orientation
Ex: Automobile manufacturers, Photocopy
machine manufacturers
Hybrid Industries give both product/service
Ex: Automobile sellers, Restaurants, Banks
Service Industries emphasize on service
Ex: Consultancies, insurance airlines

TRANSFORMATION PROCESS

All operations whether products

or service, transform certain
inputs into outputs in presence of
feedback mechanisms and
random disturbances as shown in
the following diagram

TRANSFORMATION IN A
MANUFACTURING ORGANIZATION

TRANSFORMATION as it applies to
a purely manufacturing organization

Ex: The figure below shows the

transformation process of a
refrigerator manufacturer

TRANSFORMATION IN AN
HYBRID ORGANIZATION

TRANSFORMATION as it applies to
A hybrid service and manufacturing
organization

Ex: The figure below shows the

transformation process of a
restaurant

TRANSFORMATION IN A
SERVICE ORGANIZATION

TRANSFORMATION as it applies to
A PURELY SERVICE organization

Ex: The figure below shows the

transformation process of An MBA
institution

What Is Operations
Management?
Production is the creation of
goods and services
Operations management (OM) is
the set of activities that creates
value in the form of goods and
services by transforming inputs
into outputs

PRODUCTION & OPERATION

MANAGEMENT DEFINED
Production/Operation management is
the process which combines and
transforms the various INPUTS used
in the system into value added
PRODUCTS/SERVICES, in a
controlled manner as per policies of
the organization

PRODUCTION & OPERATION

MANAGEMENT .Contd..

The set of interrelated management activities

which are involved in manufacturing certain
products is called PRODUCTION
MANGEMENT

If this concept is applied to services, than this

corresponding set of management activities
is called OPERATIONS MANAGEMENT

Why Study OM?

OM is one of three major functions

(marketing, finance, and operations) of any
organization

We want (and need) to know how goods

and services are produced
We want to understand what operations
managers do
OM is such a costly part of an organization

What Operations
Managers Do?
Basic Management Functions

Planning
Organizing
Staffing
Leading
Controlling

The Critical Decisions

Design of goods and services

What good or service should we offer?

How should we design these products and
services?

Managing quality

How do we define quality?

Who is responsible for quality?

The Critical Decisions

Process and capacity design

What process and what capacity will these

products require?
What equipment and technology is
necessary for these processes?

Location strategy

Where should we put the facility?

On what criteria should we base the location
decision?

The Critical Decisions

Layout strategy

How should we arrange the facility?

How large must the facility be to meet our
plan?

Human resources and job design

How do we provide a reasonable work

environment?
How much can we expect our employees to
produce?

The Critical Decisions

Supply chain management

Should we make or buy this component?

Who are our suppliers and who can integrate
into our e-commerce program?

Inventory, material requirements planning,

and JIT

How much inventory of each item should we

have?
When do we re-order?

The Critical Decisions

Intermediate and shortterm scheduling

Are we better off keeping people on the

payroll during slowdowns?
Which jobs do we perform next?

Maintenance

Who is responsible for maintenance?

When do we do maintenance?