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Operation

Management
Unit-1
(BBA Sem V)
Prepared By: Ms. Mitika Mahajan
(Assistant Professor, Rai University)

What you are going to learn..
Operations Management
Nature, scope, process.
Operations strategy
transshipment and transportation and ERP

Introduction
Operations management is the management of
processes or systems that create goods and/or
provide services.
Operations is often defined as a transformation
process.
It encompasses forecasting, capacity planning,
scheduling, managing inventories, assuring
quality, motivating employees, deciding where
to locate facilities, buying material and
equipment and maintaining them, and more.
Example: Airline Company
Forecasting : Such things as seat demand for
flights, the growth in air travel, and weather
and landing conditions.
Capacity planning: Deciding the number of
planes and where to use them.
Scheduling of planes for flights and for
routine maintenance; scheduling of pilots and
flight attendants; and scheduling of ground
crews, counter staff, and baggage handlers.
Managing inventories of such items as food
and beverages and spare parts.
Example: Airline Company
Assuring quality, essential in flying and
maintenance operations, where the emphasis is on
safety. Also important in dealing with customers at
ticket counters, check-in, telephone and electronic
reservations, and in-flight service, where the
emphasis is on efficiency and courtesy.
Employee motivation and training in all phases of
operations.
Location of facilities according to top managers
decisions on which cities to provide service for,
where to locate maintenance facilities, and where to
locate major and minor hubs.
Buying materials such as fuel, food, bags, and spare
parts. Buying aircraft and maintaining it.
Operation as transformation Process

Operation as transformation Process

Nature of Operation Management
(Operations interfaces with a
number of supporting functions)

Nature of Operation Management
(Operations interfaces with a
number of supporting functions)
Accounting supplies information to management on costs
of labour, materials, and overhead, and may provide
reports on items such as scrap, downtime, and inventories.
Accounting includes accounts payables and accounts
receivables. Accountants gather the information needed for
financial statements as well.
Purchasing has responsibility for procurement of
materials, supplies, equipment, and services. Close contact
with operations is necessary to ensure correct quantities
and timing of purchases. The purchasing department is
often called on to evaluate vendors for quality, delivery
time reliability, service, price, and flexibility. Purchasing
may also be involved in arranging incoming transportation,
receiving, and inspecting the purchased goods.
The personnel or human resources department is
concerned with recruitment and training of personnel,
labour relations, contract negotiations, wage and salary
administration, and ensuring the health and safety of
employees.
Product design in manufacturing companies usually is
done by engineers, but in other companies it could be done
by architects, scientists, chemists, and chefs. Designers
create goods and services from information given to them
on markets by marketing and provide product
specifications to operations to make the products.
Maintenance is responsible for general upkeep and repair
of equipment, buildings and grounds, heating and air-
conditioning; removing toxic wastes; parking; and perhaps
security.

Manufacturing engineering is responsible for design or
purchase of the machines and equipment needed in the
production process. Also called process engineers, they are
mainly trained as mechanical engineers, but other fields
like electrical and chemical may also be needed.
Logistics involves the transportation of raw material to the
plant, storage, and shipping of goods to warehouses, retail
outlets, or final customers.
Management information systems (MIS) is concerned
with providing management with the information it needs
to effectively manage. This occurs mainly through
designing systems (hardware and software) to capture
relevant information and preparing reports.

THE SCOPE OF OPERATIONS
MANAGEMENT
To guide the system by decision making.


Use of Operation Management
Many companies use operations
management strategies, tactics, and
actions in order to improve their
efficiency and effectiveness.
Efficiency refers to operating at
minimum cost and fast, whereas
effectiveness refers to achieving the
intended goals (quality).
Evolution of different concepts in
Operation Management


A comparison of craft, mass,
and lean production

Operations StrategyAn Overview
What Is Operations Strategy?
Operations strategy is the development of a
long-term plan for using the major
resources of the firm for a high degree of
compatibility between these resources and
the firms long term corporate strategy.
Operations StrategyAn Overview
What Is Operations Strategy?
Some of the major long-term issues addressed
in operations strategy include

How large do we make our facilities?
What type of process(es) do we install to make
the products or provide services?
What will our supply chain look like?
What will be the nature of our workforce?
How do we ensure quality?
Operations Strategy Means Adding
Value for the Customer

Perceived customer value= Total Benefits
Total Costs

In determining the value of a product, be it
a good or a service, customers take into
consideration all of the benefits derived
from the product and compare it with all of
the costs of that product.
Value for the Customer
Interpretation
When this ratio is >1, customers perceive
value; the greater the number, the more
value.
When this ratio is <1, customers feel they
have overpaid for the product, that they
have been ripped off, and are highly
unlikely to buy that product again in the
future.
Transshipment
Transfer of a shipment from one carrier, or more
commonly, from one vessel to another whereas in
transit.
Transshipments are usually made
(1) where there is no direct air, land, or sea link between
the consignor's and consignee's countries,
(2) where the intended port of entry is blocked, or
(3) to hide the identity of the port or country of origin.
Because transshipment exposes the shipment to a
higher probability of damage or loss, some purchase
orders or letters of credit specifically prohibit it.
Transportation
Any device used to move an item from
one location to another. Common forms of
transportation include
planes, trains, automobiles, and other two-
wheel devices such as bikes or motorcycles.
The process of shipping or moving an item
from point A to point B.
ERP(Enterprise Resource Planning)
A software to improve the performance of
the organizational resource planning,
management control and operational
control.


Benefits of ERP
Accurate sales forecasting
Order tracking
Integrated purchase orders
Reduced cycle time
Faster information transactions
Lays groundwork for e-commerce
Reduction in business lead time
Improved customer satisfaction
Selling Buyer concept of ERP system
Order Processing Cycle

Steps of ERP system implementation
Project Planning
Requirement determination
Vendor selection
Plan of implementation
Implementation of ERP solution
Testing
Evaluation
Steps of ERP system implementation
Project Planning: Deciding project goals,
recognizing business needs, and estimating
project cost
Requirement determination: Develop list of
specific requirements that company needs
Selection of vendor: two types of vendors
ERP providers
ERP implementers


Steps of ERP system implementation
Plan of implementation: Scope, timeline,
project sponsor, budget, risk analysis,
communication, impact analysis, training,
scope of management process, process for
feedback
Implementation of ERP solution: Execute the
ERP according to needs of the company
Testing: Examine that all information
generated are precise and working properly
Evaluation: focuses on the purpose and
objectives that were set in the planning stage.