Introduction to Operations Management

What do you expect from your bank when going to open a new
account?
What do you expect from the postoffice when you are receiving
an urgent notification?
What do you expect when you go out for
dinner to your favorite restaurant?
What do you expect when you require
medical care?
What do you need from your mechanic?
What is, after all, operations management?
(Slack, Operations management)
 DEFINITION:
Operations management is the activity of managing the
resources which produce and deliver products and services.

The operations function is the part of the organization that is responsible for this
activity. Every organization has an operations function because every organization
produces some type of products and/or services. However, not all types of
organization will necessarily call the operations function by this name. (Note that we
also use the shorter terms the operation and operations interchangeably with the
operations function).
Operations managers are the people who have particular responsibility for managing
some, or all, of the resources which compose the operations function. Again, in some
organizations the operations manager could be called by some other name. For
example, he or she might be called the fleet manager in a distribution company, the
administrative manager in a hospital, or the store manager in a supermarket.
Operations management is the term used for the
activities which produce and deliver products and
services.

Our goal today:

Identify the operations function in any kind of
organisation.
Describe any operation in terms of its
transforming resources, transformed resources,
operations processes and products and services.
Understand the responsibilities of operations
managers.
All types of organisation must do operations management because all
organisations produce some mixture of products and services. Remember
though that in many organisations the term operations management will
not be used. In many smaller organisations operations management may be
done by people who perform many other types of task such as marketing
and accounting.

Operations management is important. The decisions it makes have a major

impact on both the cost of producing products or services and how well the
products and services are produced and delivered which has a major impact
on the revenue coming into the organisation. So, operations management has
an important impact on both revenue and cost and therefore profits. This also
applies to not-for-profit organisations. In a local government service, for
example, good operations management can produce services which satisfy
the community and are produced efficiently. So the community are getting
value for money from their local services.
Operations in the organization
The operations function is central to the organization because it produces the
goods and services which are its reason for existing, but it is not the only
function. It is, however, one of the three core functions of any organization.
These are:

the marketing (including sales) function which is responsible for

communicating the organizations products and services to its markets in
order to generate customer requests for service;
the product/service development function which is responsible for
creating new and modified products and services in order to generate future
customer requests for service;
the operations function which is responsible for fulfilling customer
requests for service through the production and delivery of products and
services.
In addition, there are the support functions which enable the core functions to
operate effectively.

These include, for example:

the accounting and finance function which provides the information to help
economic decision-making and manages the financial resources of the organization;
the human resources function which recruits and develops the organizations staff
as well as looking after their welfare.
 Working effectively with the other parts of the organization is
one of the most important responsibilities of operations
management. It is a fundamental of modern management
that functional boundaries should not hinder efficient internal
processes.

Operations managements responsibility to support functions

is primarily to make sure that they understand operations
needs and help them to satisfy these needs. The relationship
with the other two core functions is more equal less of this
is what we want and more this is what we can do currently
how do we reconcile this with broader business needs?
Services and products are merging

Increasingly the distinction between services and products is both

difficult to define and not particularly useful. Information and
communications technologies are even overcoming some of the
consequences of the intangibility of services. Internet-based retailers,
for example, are increasingly transporting a larger proportion of their
services into customers homes. Even the official statistics compiled by
governments have difficulty in separating products and services.
Some authorities see the essential purpose of all businesses, and
therefore operations processes, as being to service customers.
Therefore, they argue, all operations are service providers which may
produce products as a part of serving their customers.

We treat operations management as being important for all

organizations. Whether they see themselves as manufacturers or
service providers is very much a secondary issue.
Operations management is relevant to all parts of the business
It is not just the operations function that manages processes; all functions
manage processes. For example, the marketing function will have processes
that produce demand forecasts, processes that produce advertising
campaigns and processes that produce marketing plans.
Each function will have its technical knowledge. In marketing, this is the
expertise in designing and shaping marketing plans; in finance, it is the
technical knowledge of financial reporting.
Yet each will also have a process management role of producing plans,
policies, reports and services. The implications of this are very important.
Because all managers have some responsibility for managing processes,
they are, to some extent, operations managers. They all should want to
give good service to their (often internal) customers, and they all will want
to do this efficiently.
So, operations management is relevant for all functions, and all managers
should have something to learn from the principles, concepts, approaches
and techniques of operations management. It also means that we must
distinguish between two meanings of operations:
Operations as a function, meaning the part of
the organization which produces the products
and services for the organizations external
customers;

Operations as an activity, meaning the

management of the processes within any of the
organizations functions.
The activities of operations management

Understanding the operations strategic performance objectives. The first

responsibility of any operations management team is to understand what it is
trying to achieve. This means understanding how to judge the performance of
the operation at different levels, from broad and strategic to more
operational performance objectives.

Developing an operations strategy for the organization. Operations

management involves hundreds of minute-by-minute decisions, so it is vital
that there is a set of general principles which can guide decision-making
towards the organizations longer-term goals.

Designing the operations products, services and processes. Design is the

activity of determining the physical form, shape and composition of products,
services and processes. It is a crucial part of operations managers activities.
Planning and controlling the operation. Planning and control is the activity of
deciding what the operations resources should be doing, then making sure
that they really are doing it.

Improving the performance of the operation. The continuing responsibility of

all operations managers is to improve the performance of their operation.

The social responsibilities of operations management. It is increasingly

recognized by many businesses that operations managers have a set of broad
societal responsibilities and concerns beyond their direct activities. The
general term for these aspects of business responsibility is corporate social
responsibility or CSR. It should be of particular interest to operations
managers, because their activities can have a direct and significant effect on
society.
How are operations different from each other?
We should differentiate between different types of operation by
using four dimensions it calls these the four Vs of operations.
They are:

Volume how many products or services are made by the

operation?
Variety how many different types of products or services are
made by the operation?
Variation how much does the level of demand change over
time?
Visibility how much of the operations internal working are
exposed to its customers?
When operations processes do differ they do so mainly in terms
of their volume, variety, variation and visibility.
But not everyone agrees that these dimensions are sufficient.

Operations processes, they say, differ in far more ways that the
four Vs suggest. At the very least more dimensions are needed,
for example the relative complexity which processes have to
cope with, or the degree of discretion or decision making
required by the staff with the process, or the risk of things going
wrong in the process, or the value of each product or service
produced, and so on.
What responsibilities do operations managers have?

Direct responsibilities the activities which are directly related

to producing and delivering products and services.

Indirect responsibilities the activities involved in interfacing

with other parts of the organisation.

Broad responsibilities a wider set of tasks that involve scanning

the business, social and political environment in which the
organisation exists in order to understand its context.
Exercise
The purpose of this exercise is to try and give you an understanding of how
the broad strategy of an organization affects its operations.
Think of IKEA. They have clear visions of how they wish to compete.
So, start by thinking about how IKEA competes in selling furniture.
Choose two words that seem to sum up how they would like to be seen.
Typically words from which you could choose include the following:
innovative, cheap, customized, service, individual service (OK, so thats two
words!), quality, convenient, prestigious, colourful, relationship, authentic,
safe, etc.
Think about the ways in which the operation have been designed.
Dimensions you might wish to consider include: size of the shop, location of
the shops, variety of products stocked, layout of the shop, how the staff
interact with customers, how customers flow through the shop, what are the
sequence of activities that customers have to go through in order to make
their purchase and leave the shop, the dcor and general atmosphere of the
shop, etc.
Question:

Why is operations management relevant to

managers in other organization functions?
Which of the following activities is not a direct responsibility
of operations management?

Planning and controlling the operation

Determining the exact mix of products and services that customers will
want
Designing the operations products, services and processes

Developing an operations strategy for the operation

Which of the following is the least likely decision to
be made by Operations Managers?

How much capacity is required to balance demand

Selecting the location and layout of a facility

Deciding which market areas to manufacture products for

How to use quality techniques to reduce waste

Designing and improving the jobs of the workforce

OLYMPIC GAMES 2012
10.490 sportpeople, 2 milions visitors, 70 sheep
at the opening ceremony
11 million tickets were issued for the Olympic and Paralympic
Games, of which 6.60 million for British viewers. 75 percent
were sold in the UK. The rest was divided between the IOC,
sponsors and national committees.
9.3 billion was spent on organizing OG. It is almost four
times the cost of the time of acceptance of London
candidature in 2005. Initially set budgets for security and
opening and closing ceremonies were doubled. The security
now reach 553 million pounds, and the ceremony costs 81
million pounds.
10,490 athletes enrolled in 26 Olympic disciplines will compete at 302
samples. They will be subjected to 5,000 doping tests.
 1 million of sports articles needed for these games, including
26,400 tennis balls, basketballs 600 and 6,000 targets for
archery.
34 venues in the UK are set to OJ, of which nine in Olympic
Park, located in east London. It took three years and 10,000
tons of steel to build the Olympic stadium, located in the
center of the park.
10,000 temporary toilets have been installed at these 34
places'' sufficient'' Maltese population, according to
organizers.

2 million visitors in London for the Olympic Games.

 14 million meals served during the OJ. 232 tons of
potatoes, 100 tons of meat, 75,000 liters of milk and 330
tonnes of fruit and vegetables are provided for feeding
athletes.

McDonald's Olympic Village has installed his biggest

restaurant in the world, provided that it will sell 50,000 Big
Macs, 180,000 portions of fries and 30,000 milkshakes.

46,000 workers built the Park and the Olympic village. In

total, 200,000 people are mobilized for OJ, of which
100,000 employees and 70,000 volunteers.

Has over 12,875 miles total Olympic torch before arriving at

the stadium for the opening OJ.
Is this an easy task for the
Operations Manager of the
Olympics?
Owing to the size of Olympic Logistics operations, as well as for
reasons of organizational and implementation effectiveness, the
Organizing Committee of Olympic Games (OCOG) of the host city
had special departments, responsible for the design,
implementation and management of all related activities,
including:
demand planning and analysis;
contract management;
international freight forwarding;
receipt, warehousing and distribution;
asset management;
delivery management;
venue logistics management (VLM); and
reverse logistics.
The major activity of the supply chain that concerns external
clients is transportation, i.e. freight forwarding including
customs clearance procedures from the point of origin to the
destination Olympic venue (and the reverse). The OCOG
(internal) supply chain is the most extensive and comprises
demand
planning, procurement, warehousing, transportation and
distribution,
Managing Games-time deliveries, and reverse logistics (i.e.
post-games removal and recovery of materials).
Logistics activities at Olympic venues include receipt at
venues, in situmaterial handling, local storage, installation,
etc.
The Olympic games is a classical case of a project with
immovable deadlines. The date of the opening
ceremony, as well as the entire schedule of the games,
is set as soon as the games are awarded to a candidate
city, i.e. years before the games start. This schedule
cannot be changed, and forms a hard constraint for
planning and project management of games
operations, including logistics.
Work right from the first time.
In addition to the fixed schedule, the Olympic logistics staff does not get a
second chance to correct mistakes. During the two weeks of the games, every
mistake may have significant implications; furthermore, there is no time to
improve processes, procedures or provide additional staff training.

Staff mix. Typically, the staff of the Olympic logistics team (especially the
labour force) is newly hired, and in most cases inexperienced. Furthermore,
most OCOGs use volunteers. In Olympic logistics, a ratio 1:1 of professional
staff-to-volunteers is not unusual.
Resources
Atlanta 1996 Sydney 2000
Warehousing space 131,000m2 67,500m2
Material handling
equipment (number) Not known 165
Transportation vehicles +400 Not known
Human resources
(employees) 163 550
Human resources
(volunteers) 500 500
Major task Activities

Freight forwarding and customs clearance

Transportation into UK of items and equipment belonging to National
Organizing Committees (NOCs)
Warehousing and distribution Management of ATHOCs warehouses
(receipt, breakdown, quality control, put away, picking, consolidation, etc.)
Distribution of items and equipment to venues
Venue logistics
Receipt, storage, installation, maintenance (in some cases) of venue items
and equipment
Delivery coordination
Coordination of deliveries of goods, items and equipment into venues by
suppliers of ATHOC (delivery scheduling, security assurance, security control,
etc.)
Asset tracking
Development and operation of a comprehensive asset tracking system
Reverse logistics
Asset reclaim, transportation, warehousing, tracking, disposal or distribution