Introduction

and
Sustainability Issues
Suri Gurumurthi, Ph.D.
HKUST ISOM

Fast Food Can be Good

https://www.youtube.com/watch?v=gq3fp4riuHg

From Sand to Semiconductor Chips

https://www.youtube.com/watch?v=YhsKCnDD3F8
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Operations Management
n

What is operations?
n

The part of a business organization that is responsible for

producing and delivering goods or services

How can we define operations management, planning or

control?
n

The management of systems or processes that create goods

and/or provide services

Physical Good or Service?

n

Goods are physical items that include raw

materials, parts, subassemblies, and final products.
n
n
n
n

Automobile
Computer
Oven
Shampoo

Services are activities that provide some

combination of time, location, form or psychological
value.
n
n
n
n
n

Air travel
Education
Haircut
Legal counsel
Restaurant

Operational Decisions in a Nutshell

Most operations decisions involve many alternatives that can have

quite different impacts on costs or profits
Typical operations decisions include:

What: What resources are needed, and in what amounts?

When: When will each resource be needed? When should the work be
scheduled? When should materials and other supplies be ordered?

Where: Where will the work be done?

How: How will the product or service be designed? How will the work
be done? How will resources be allocated?

Who: Who will do the work?

What is a Project?
n

A structured set of inter-connected tasks (activities)

n

Centered around a common goal, usually one main objective, & bound
by a common timeline
Tailored for the unique requirements set forth by the common
business objective
Designed for effectiveness, timeliness, and budget efficiency

Examples: NASA missions, Construction Projects, Design

and Development, etc.

What is a Process?
n

A structured set of inter-connected tasks repeated over

several cycles, and the rules governing them:
Centered around common goals, & bound to a common
rhythm/timeline, business objective
Designed for consistency, reliability, and efficiency across
several iterations or cycles
Examples:
n
n
n

Mass production,
Volume services fast food chains
Retailing, etc.

What is a Supply Chain?

n
n

n
n

A structured set of inter-connected projects & processes

Centered around common market objective(s), & bound to a
common rhythm/timeline; business objectives or market needs
Frequently spanning multiple firms
Designed for consistency, reliability, efficiency, and
coordination across firms
Examples: Supports all products/services!

Systems Approach to
Operations Management

System - a set of interrelated parts that must work

together

The business organization is a system composed of subsystems

marketing subsystem
operations subsystem
finance subsystem

The systems approach

Emphasizes interrelationships among subsystems

Main theme is that the whole is greater than the sum of its parts
The output and objectives of the organization take precedence
over those of any one subsystem
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Operations Performance Measures

Effectiveness
(Quality)

Value to Customer
& Business=
Quality/Cost

Efficiency
(Cost)

The goal for project, process, and supply chain managers is to

deliver improved value through greater effectiveness and/or greater
efficiencies.

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Historical Impact of Operations Management

Industrial Revolution

Mass Production

Standardization of Components

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Historical Impact of Operations Management

Mass Production
Flexible Manufacturing

Mass Customization
Quality Movement
Lean Processes

IT / Services Revolution

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Operations/Supply Chain Management 101

n

Core business functions

n
n
n

Design and development

Marketing
Operations

Support functions
n
n
n
n

Supply chain management: A

more holistic view of business

Accounting and finance

Human resources
Information systems

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Strategy

Critical
Issues

Supplier

Managerial
Issues

Synchronization
Issues

Sustainability
Issues

Planning

Supply Chain
Integration

Economic

Control

Information

Social

Improvement

Business
Relationship

Environmental

Design and
Development

Supplies and
Sourcing

Value-Added
Processing

Marketing and
Distribution

Customer

Life Cycle Stages of Business Operations

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Criticality of Operations Management

n

Operations function is an integral part of an business

n
n
n

Operations can be found everywhere in a business

n

A core business function

All functions need to work together
Operational decisions always affect other functional decisions

All activities, including engineering, marketing, finance etc. have

operational elements
Functional managers need to understand the principles of
operational management to keep their functional processes
running effectively and efficiently

Even if you are new to learning business operations, you

are probably aware of its many historical developments
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What really defines a successful business?

n

A successful business should:

n
n
n

Create value for its shareholders

Achieve sustainable profitable growth
Act responsibly toward its stakeholders

Three attributes of a successful business

n
n
n

Product and service ideas

Customer satisfaction
Planning and execution

Business Success

Quality of Life

Consumer Value

Sustainability

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Operations as a transformation process

Input

Output

Productivity = Outputs / Inputs

n
n

Transformation
Process

Productivity is only a relative measure

Comparing to others or over a period of time

Higher productivity means:

n
n
n

Higher income
Improved work condition
Better standard of living

Business Success

Quality of Life

Quality of life

Consumer Value

Sustainability

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Operations is about trade-offs

n

The perils of focusing purely on productivity!

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Operations as value-adding processes

n

What do you consider value?

Value = Performance / Price

n

Quality is a major factor in

determining performance
Remember this?

Business Success

Quality of Life

Consumer Value

Sustainability

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What do customers value?

21

Business operations can (and should) help

build a sustainable environment for all

Business Success

Quality of Life

Consumer Value

Sustainability

22

Many green opportunities as found in

business operations
Design
Reduce

Raw
Material

Manufacturing
Process

End of
Product Life

Finished
Product

Reuse

Waste
Recycle
(industrial)

Recycle (post
consumption)

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Corporate social responsibility (CSR)

n

Why businesses need to

act responsibly?
What is the purpose of
business?

The five dimensions of CSR

n
n
n
n
n

Economic
Social
Environmental
Stakeholder
Voluntariness

Profit, People, Planet

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The five dimensions of CSR

Dimension

Definition

Examples

Economic

Socio-economic or financial aspects,

including describing CSR in terms of its
impact on the business operations

Preserving the profitability

Contribute to economic development

Social

The relationship between business and

society in general

Contribute to a better society

Integrate social concerns in their
business operations
Consider the full scope of their impact
on communities

Environmental

The natural environment and

sustainability of business practice

A cleaner environment
Environmental stewardship
Environmental concerns in business
operations

Stakeholder

Considering all stakeholders or

stakeholder groups

Interaction with their stakeholders

How organizations interact with their
employees, suppliers, customers and
communities

Ethical/
Volunteering

Actions not prescribed by law and

doing more than you have to

Based on ethical values

Beyond legal obligations
Voluntary
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The environmental dimension of CSR

n

Increasing public awareness and expectation

n
n

Global warming
Government regulations (especially in Europe)

ISO14000 environmental management standards

Participation and requirements of major corporations

n

Wal-Marts initiative: To be supplied 100% by renewable

energy, create zero waste, and sell products that sustain people
and the environment over the next five years
Competitive pressure, financial and non-financial incentives

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Example: Carbon emission audit at Cathay

Pacific

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Examples of CSR impact from operations

and supply chain-related decisions 1
n

Product/service design
n

Process and supply chain design

n

Customer safety, recyclability of

materials, energy consumption,
waste material generation

Environmental and employment impacts of location, reducing

transport-related energy, development of suppliers in
environmental practice

Layout of facilities
n

Staff safety, disabled customer access, energy efficiency

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Examples of CSR impact from operations

and supply chain-related decisions 2
n

Process technology
n

Job design
n

Staff safety, waste and product disposal, noise pollution, fumes

and emissions pollution, energy efficiency

Workplace stress, unsocial working hours, transportation of staff

to/from work, development in environmental education

Sales and Operations Planning

n

Employment policies, material utilization and wastage,

environmental impact and transport pollution of frequent JIT
supply, over-production waste of poor planning, local impact of
extended operating hours

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Examples of CSR impact from operations

and supply chain-related decisions 3
n

Inventory planning/control
n

Supply chain planning/control

n

Minimizing energy consumption in distribution, recyclability of

transportation consumables

Quality planning/control and total quality management

n

Price manipulation, energy management of replenishment

transportation, obsolescence and wastage

Scrap and wastage of materials, waste in energy consumption

Failure prevention and recovery

n

Environmental impact of process failures, recovery to minimize

impact of failures
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Green Intiatives can generate profits!

n

Collaboration tools can reduce travel

n

Supply chain management tools can optimize supply

chains for environmental factors
n
n

Routing
Consolidation

Careful selection for raw materials can suppress impact

on environment
n

Video/Tele conference

Bio-plastics (biodegradable plastics), renewable energy

Business activity monitoring and alerts can drive

improved decisions
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