Fundamentals of Operations Management

1. Fundamentals of Operations Management Nayyar Butt Assistant Professor Management Sciences, Lahore nbutt@ciitlahore.edu.pk

2. What is operations management? What are the similarities between all operations? How are operations different from each other? Key Questions???

3. What is operations management?

4. Operations management defined Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.

5. Kitchen unit manufacturing operation Back office operation in a bank Retail operation Take-out / restaurant operation They are all operations

6. The best way to start understanding the nature of ‘operations’ is to look around you Everything you can see around you (except the flesh and blood) has been processed by an operation Every service you consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation Operations Managers create everything you buy, sit on, wear, eat, throw at people, and throw away

7. The operation’s strategic objectives Operations strategy The operation’s competitive role and position Operations strategy Design Improvement Operations management Planning and control A general model of operations management • Transformed resources … • Materials • Information • Customers Output products and services Input resources Customers • Transforming resources … • Facilities • Staff

8. ‘High-end’ sandwich and snack retailer Uses only ‘wholesome’ ingredients All shops have own kitchens, which make fresh sandwiches every day Fresh ingredients delivered early every morning The same staff who serve you at lunch made the sandwiches that morning “We don’t work nights, we wear jeans, we party …” Prêt a Manger

9. Nutritional ‘mechanical’ and aesthetic design of the sandwiches and snacks Design, location and management of stores and in-store processes and the network that supplies them Promotional activities, market research, etc. The three basic functions at Prêt a Manger Product /Service Development Marketing Operations

10. Outputs Inputs that transform inputs … into outputs All operations are transformation processes … Transformation process

11. Output products and services Some inputs are transformed resources Some inputs are transforming resources • Transformed resources … • Materials • Information • Customers Input resources Transformation process Customers • Transforming resources … • Facilities • Staff Outputs are products and services that add value for customers

12. Served and satisfied customers At Prêt a Manger • Transformed resources … • Ingredients • Packaging • Customers Input resources • Transforming resources … • Equipment • Fittings • Staff

13. Financial services An account management centre at a large retail bank Financial analyst advising a client at an investment bank Furniture manufacturing Craft production of reproduction ‘antique’ furniture Mass production of kitchen units Hotels Lobby of an international luxury hotel Value-for-money hotel Differences within sectors are often greater than the differences between sectors

14. Low Volume High High High Variety Low Variation in demand High Low Low High Visibility A Typology of Operations

15. Low repetition Each staff member performs more of job Less systemization High unit costs High repeatability Specialization Capital intensive Low unit costs Low Volume High High A Typology of Operations Implications Implications

16. Well defined Routine Standardized Regular Low unit costs Flexible Complex Match customer needs High unit costs High Variety Low A Typology of Operations Implications Implications

17. Stable Routine Predictable High utilization Low unit costs Changing capacity Anticipation Flexibility In touch with demand High unit costs Variation in demand High Low A Typology of Operations Implications Implications

18. Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs Low High Visibility A Typology of Operations Implications Implications

19. Low repetition Each staff member performs more of job Less systemization High unit costs High repeatability Specialization Capital intensive Low unit costs Low Volume High High Well defined Routine Standardized Regular Low unit costs Flexible Complex Match customer needs High unit costs High Variety Low Stable Routine Predictable High utilization Low unit costs Changing capacity Anticipation Flexibility In touch with demand High unit costs Variation in demand High Low Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs Low High Visibility A Typology of Operations Implications Implications

20. Turns cloth into suits Low volume of each item High variety High customer contact Process involves skilled staff, basic technology (Scissors, chalk, tape measure), and simple flow of materials BespokeTailors

21. Tiptree Christmas Puddings

22. Turns fruit, flour etcinto puddings Medium volume Low variety Very seasonal demand – variation Low/No customer contact Quite specialised technology, semi-skilled labour, flow from stage to stage Tiptree Christmas Puddings

23. Turns information into abuildable design Low volume – one-off High Variety – each job different Variable demand butno seasonal pattern Medium customer contact Highly skilled staff, basic technology, time-critical project process Millau Viaduct – Foster and Partners (Architects)

25. Turns coal and gas intoelectricity No variety High volume Some variation in demand Very capital intensive, specialised technology; few staff, doing maintenance jobs. Power Station

26. Turns new students intoknowledgeable and skilledgraduates Volume – medium Variety – medium Visibility – medium(But depends on which activity) Mostly skilled staff and simple technologies; complex flow and scheduling COMSATS Undergraduate Degree

27. Operations Management - Definition “the activities, decisions and responsibilities of managing the production and delivery of products and services” (Slack et al, 2004)

28. The Transformation Process Transformed resources Business environment Goods and services Transformation Process OUTPUT INPUT Transforming resources Business environment

29. transformed vs transforming resources materials, information, customers physical form, location, possession and state product-service continuum Transformation Characteristics

30. Product-service continuum Pure Goods Crude oil production Aluminium Smelting Specialist Machine Tool Maker Restaurant Computer Systems Services Management Consultancy Psychotherapy Clinic Pure Services

31. Transformation types

32. Macro and micro operations Macro operation Micro operations

33. Vital Dimensions of Operations….. volume variety variation visibility (a.k.a.customer contact)

34. Applying the four Vs

35. Process Choice Professional services Job Service shops Batch Line Mass services Continuous Variety Volume

36. Front Office/Back Office More variety, lower volume, more variation FRONT OFFICE High customer contact Customers Customers BACK OFFICE Low customer contact Higher volume, lower variety SEE - http://www.ft.com/pp/sharedservices

37. The operation’s strategic objectives Transformed resources Goods and services INPUT OUTPUT Transforming resources Model of Operations Management Business environment The strategy of the operation Operations Strategy The operation’s competitive role & position Operations Management IMPROVEMENT DESIGN PLANNING & CONTROL Business environment

38. Process Flowcharting Beginning or end of process Operation (an activity that directly adds value) Activity Inspection (a check of some sort) Transport (a movement of some thing) Input or Output from the process Delay (a wait, e.g. for materials) Direction of flow Storage (deliberate storage, as opposed to a delay) Decision (exercising discretion) Process mapping symbols derived from Systems Analysis Process mapping symbols derived from “Scientific Management”

39. FLOW PROCESS CHART A day at the adventure holiday Perinogn Activity Location 1 get up 2 go to wash room 3 wash, brush teeth 4 return to bedroom 5 dress 6 go to dining room 7 await serving 8 eat 9 go to rifle range 10 await instructor and equipment 11 check equipment 12 rifle shooting 13 go to dining room Description of Element 14 eat lunch 15 go to bedroom 16 prepare for sailing 17 go to lake 18 await instructor 19 check equipment 20 sailing 21 go to bedroom 22 change 23 go to dining room 24 eat 25 wait for camp fire 26 camp fire 27 go to bedroom 28 prepare for bed 29 go tow ash room 30 go to bed 31 go to toilet 32 go to bed again 33 sleep Process flow chart for one day on an adventure holiday

40. Right hand Left hand Wait Pick up base plate Insert into fixture Hold base plate Pick up two supports Locate back plate Pick up screws Locate screws Pick up air driver Fasten screws Wait Replace air driver Pick up centre assembly Inspect centre assembly Hold centre assembly Locate and fix Switch on timer Wait to end test Inspect Inspect Transfer grasp Transfer grasp Wait Put aside ‘Two handed’ process chart

41. Tutorial exercise • Draw a process flow chart that describes how you get up • and travel to a nine o’clock lecture. Use the ‘Scientific • Management’ style symbols. You will need several attempts. • Think about how you would change the process to • emphasise: • Low cost • Speed (i.e. getting up as late as possible) • Dependability (i.e. arriving on time) • Quality