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Operations management

Refers to the administration of business practices to create the highest level of


efficiency possible within an organization. It is concerned with converting materials and
labor into goods and services as efficiently as possible to maximize the profit of an
organization
Operations management refers to the administration of business practices to create
the highest level of efficiency possible within an organization. It is concerned with converting
materials and labor into goods and services as efficiently as possible to maximize the profit
of an organization. Operations management teams attempt to balance costs with revenue to
achieve the highest net operating profit possible.
Origin of Operation Management

Until the end of the 18th century, agriculture was the predominant industry in
every country. The advent of the steam engine and Eli Whitney's concept of
standardized parts paved the way for the Industrial Revolution with its large
manufacturing facilities powered by steam or water. A number of countries (the United
States included) evolved from an agricultural economy to an industrial economy. But for
a time, manufacturing was more of an art than a science. This changed with the
introduction of Frederick W. Taylor's systematic approach to scientific management at
the beginning of the twentieth century. The introduction of Taylor's method of scientific
management and Henry Ford's moving assembly line brought the world into an age
where management was predominantly centered around the production of goods.

In the late 1950s and early 1960s scholars moved from writing about industrial
engineering and operations research into writing about production management.
Production management had itself become a professional field as well as an academic
discipline. As the U.S. economy evolved into a service economy and operations
techniques began to be incorporated into services the term production/operations
management came into use. Today, services are such a pervasive part of our life that
the term operations management is used almost exclusively.
Operations in some form has been around as long as human endeavour itself
but, in manufacturing at least, it has changed dramatically over time, and there are three
major phases - craft manufacturing, mass production and the modern period. Let's look
at each of these briefly in turn.

Craft manufacturing

Craft manufacturing describes the process by which skilled craftspeople produce goods
in low volume, with a high degree of variety, to meet the requirements of their individual
customers. Over the centuries, skills have been transmitted from masters to apprentices
and journeymen, and controlled by guilds. Craftspeople usually worked at home or in
small workshops. Such a system worked well for small-scale local production, with low
levels of competition. Some industries, such as furniture manufacture and clockmaking,
still include a significant proportion of craft working.

Operations in some form has been around as long as human endeavour itself but, in
manufacturing at least, it has changed dramatically over time, and there are three major
phases - craft manufacturing, mass production and the modern period. Let's look at
each of these briefly in turn.

Craft manufacturing

Craft manufacturing describes the process by which skilled craftspeople produce goods
in low volume, with a high degree of variety, to meet the requirements of their individual
customers. Over the centuries, skills have been transmitted from masters to apprentices
and journeymen, and controlled by guilds. Craftspeople usually worked at home or in
small workshops. Such a system worked well for small-scale local production, with low
levels of competition. Some industries, such as furniture manufacture and clockmaking,
still include a significant proportion of craft working.

Mass production

In many industries, craft manufacturing began to be replaced by mass production in the


19th century. Mass production involves producing goods in high volume with low variety
the opposite of craft manufacturing. Customers are expected to buy what is supplied,
rather than goods made to their own specifications. Producers concentrated on keeping
costs, and hence prices, down by minimising the variety of both components and
products and setting up large production runs. They developed aggressive advertising
and employed sales forces to market their products.

An important innovation in operations that made mass production possible was the
system of standardised and interchangeable parts known as the American system of
manufacture (Hounshell, 1984), which developed in the United States and spread to
the United Kingdom and other countries. Instead of being produced for a specific
machine or piece of equipment, parts were made to a standard design that could be
used in different models. This greatly reduced the amount of work required in cutting,
filing and fitting individual parts, and meant that people or companies could specialise in
particular parts of the production process.

A second innovation was the development by Frederick Taylor (1911) of the system of
'scientific management, which sought to redesign jobs using similar principles to those
used in designing machines. Taylor argued that the role of management was to analyse
jobs in order to find the one best way of performing any task or sequence of tasks,
rather than allowing workers to determine how to perform their jobs. By breaking down
activities into tasks that were sequential, logical and easy to understand, each worker
would have narrowly defined and repetitious tasks to perform, at high speed and
therefore with low costs (Kanigel, 1999).

A third innovation was the development of the moving assembly line by Henry Ford.
Instead of workers bringing all the parts and tools to a fixed location where one car was
put together at a time, the assembly line brought the cars to the workers. Ford thus
extended the ideas of scientific management, with the assembly line controlling the
pace of production. This completed the development of a system through which large
volumes of standardised products could be assembled by unskilled workers at
constantly decreasing costs the apogee of mass production.

The modern period

Mass production worked well as long as high volumes of mass-produced goods could
be produced and sold in predictable and slowly changing markets. However, during the
1970s, markets became highly fragmented, product life cycles reduced dramatically and
consumers had far greater choice than ever before.

An unforeseen challenge to Western manufacturers emerged from Japan. New


Japanese production techniques, such as total quality management (TQM), just-in-time
(JIT) and employee involvement were emulated elsewhere in the developed world, with
mixed results.

More recently, the mass production paradigm has been replaced, but there is as yet no
single approach to managing operations that has become similarly dominant. The
different approaches for managing operations that are currently popular include:

Flexible specialisation (Piore and Sabel, 1984) in which firms (especially small firms)
focus on separate parts of the value-adding process and collaborate within networks to
produce whole products. Such an approach requires highly developed networks,
effective processes for collaboration and the development of long-term relationships
between firms.
Lean production (Womack et al., 1990) which developed from the highly successful
Toyota Production System. It focuses on the elimination of all forms of waste from a
production system. A focus on driving inventory levels down also exposes inefficiencies,
reduces costs and cuts lead times.
Mass customisation (Pine et al., 1993) which seeks to combine high volume, as in mass
production, with adapting products to meet the requirements of individual customers.
Mass customisation is becoming increasingly feasible with the advent of new technology
and automated processes.
Agile manufacturing (Kidd, 1994) which emphasises the need for an organisation to be
able to switch frequently from one market-driven objective to another. Again, agile
manufacturing has only become feasible on a large scale with the advent of enabling
technology.

In various ways, these approaches all seek to combine the high volume and low cost
associated with mass production with the product customisation, high levels of
innovation and high levels of quality associated with craft production.

In many industries, craft manufacturing began to be replaced by mass production in the


19th century. Mass production involves producing goods in high volume with low variety
the opposite of craft manufacturing. Customers are expected to buy what is supplied,
rather than goods made to their own specifications. Producers concentrated on keeping
costs, and hence prices, down by minimising the variety of both components and
products and setting up large production runs. They developed aggressive advertising
and employed sales forces to market their products.

An important innovation in operations that made mass production possible was the
system of standardised and interchangeable parts known as the American system of
manufacture (Hounshell, 1984), which developed in the United States and spread to
the United Kingdom and other countries. Instead of being produced for a specific
machine or piece of equipment, parts were made to a standard design that could be
used in different models. This greatly reduced the amount of work required in cutting,
filing and fitting individual parts, and meant that people or companies could specialise in
particular parts of the production process.

A second innovation was the development by Frederick Taylor (1911) of the system of
'scientific management, which sought to redesign jobs using similar principles to those
used in designing machines. Taylor argued that the role of management was to analyse
jobs in order to find the one best way of performing any task or sequence of tasks,
rather than allowing workers to determine how to perform their jobs. By breaking down
activities into tasks that were sequential, logical and easy to understand, each worker
would have narrowly defined and repetitious tasks to perform, at high speed and
therefore with low costs (Kanigel, 1999).

A third innovation was the development of the moving assembly line by Henry Ford.
Instead of workers bringing all the parts and tools to a fixed location where one car was
put together at a time, the assembly line brought the cars to the workers. Ford thus
extended the ideas of scientific management, with the assembly line controlling the
pace of production. This completed the development of a system through which large
volumes of standardised products could be assembled by unskilled workers at
constantly decreasing costs the apogee of mass production.
The modern period

Mass production worked well as long as high volumes of mass-produced goods could
be produced and sold in predictable and slowly changing markets. However, during the
1970s, markets became highly fragmented, product life cycles reduced dramatically and
consumers had far greater choice than ever before.

An unforeseen challenge to Western manufacturers emerged from Japan. New


Japanese production techniques, such as total quality management (TQM), just-in-time
(JIT) and employee involvement were emulated elsewhere in the developed world, with
mixed results.

More recently, the mass production paradigm has been replaced, but there is as yet no
single approach to managing operations that has become similarly dominant. The
different approaches for managing operations that are currently popular include:

Flexible specialisation (Piore and Sabel, 1984) in which firms (especially small firms)
focus on separate parts of the value-adding process and collaborate within networks to
produce whole products. Such an approach requires highly developed networks,
effective processes for collaboration and the development of long-term relationships
between firms.
Lean production (Womack et al., 1990) which developed from the highly successful
Toyota Production System. It focuses on the elimination of all forms of waste from a
production system. A focus on driving inventory levels down also exposes inefficiencies,
reduces costs and cuts lead times.
Mass customisation (Pine et al., 1993) which seeks to combine high volume, as in mass
production, with adapting products to meet the requirements of individual customers.
Mass customisation is becoming increasingly feasible with the advent of new technology
and automated processes.
Agile manufacturing (Kidd, 1994) which emphasises the need for an organisation to be
able to switch frequently from one market-driven objective to another. Again, agile
manufacturing has only become feasible on a large scale with the advent of enabling
technology.

In various ways, these approaches all seek to combine the high volume and low cost
associated with mass production with the product customisation, high levels of
innovation and high levels of quality associated with craft production.
Development of Operations Management

The first person who gives attention to the way of efficient production is Adam Smith, the author
of The Wealth of Nations (1776). Adam Smith argued the advantages of the division of labor
(division of labor), namely:

Increased skills or skills that a person if the person doing the work in the bear
again,
Earned savings in time, because often the alternation of work from one job to another job,
The discovery of specialized machines that only do one kind of work alone in a series of work.

At this time then there is a change of production systems, from home-based production system
into a production system with machines, such as the discovery of loom, loom, and the steam
engine. The development of production become more advanced development of factories,
followed by the development of the workforce.

Eli Whitney (1880) known as the first to popularize the components can be assembled, which is
obtained through the standardization and quality control. He has won a U.S. government contract
for 10,000 guns, which are sold at high prices because the weapons are assembled. In 1852, Charles
Babbage expressed the opinion that the production process goods are activities that are not
economical in the use of machinery and manpower, in his book On the Economy of Machinery
and Manufacturers. At this time of economic production system is expected so there is no waste
of factors of production.
Followed by FW Taylor in 1881 to put forward "method of division of labor with a minimum of
motion and time are known as time and motions study. FW Taylor suggests four basic tasks of
management, namely:

Replace the rule of thumb methods (methods that are not based on science) with
the so-called scientific method to study motions minimum notice of motion, in
order to obtain maximum results.
Managers must make the selection and training of the labor union or scientifically as well as
eliminate the individualistic nature among the workers.
Develop a spirit of close cooperation between unions, employees and managers.
Hold a clear division of labor between workers and employers, making it clear division of duties
and responsibilities.

In 1913, Henry Ford and Charles Sorensen combine their knowledge of standardized components
to production lines apparent in the meat packing industry and mail order, and also adds a new
concept on the production line, where workers stand while moving materials. Carles Sonersen tow
the car chassis at a mine on his shoulder across the production line at the factory Foord, while the
other added components on the car.

Quality control also plays a major role in the history of operations management. Walter Shewhart
in 1924 combined with the need for knowledge of statistical quality control and discover the basics
of statistical calculations and sampling for quality control.Development of operations management
followed later with the advent of industrial revolution. At this time, there were developments that
led to intense competition in the field of production. The authorities began to think about the
importance of demand forecasts, and forecasting product quality improvement as a result of the
continued progress of commercial and political marketing.
Opinion on the direction of production activity:

Looking for strategic market


Develop a production facility with technology development
Promote the production results.

On and after the depression teriadi, 1930, the operation management development leads to the use
of Scientific Management, was marked by the introduction and development of Statistical Quality
by Walter Stewart, 1931, and the development of Work Sampling by DHC Tippet, 1934, who
discovered the standard sampling procedures to determine the delay in the production process,
working time, which is known as the standard of delays.

W. Edwards Deming (1950) and Frederick Taylor argued that management must do more to
improve the work environment and processes in order to get better quality.Operations management
continues to grow with the contributions from other disciplines, including industrial engineering
and management science. This knowledge management as well as statistics and economics have
contributed to increased productivity. After World War II, the development of operations
management is becoming increasingly rapid, marked by the discovery of methods of Linear
Programming, Waiting Line Theory, developed in industry analysis, and began to use computers
in the operating system designs such as Computer Aided Design and Computer Models for
Operating Management.

The most important contribution to the management of the operation is of science informatics,
which is defined by Jay Heizer and Barry Render as a systematic process performed on the data to
obtain information. Science informatics, internet, e-commerce and contribute to increased
productivity and provide goods and services that are more varied in the community.