Operations Management: An

introduction
by
Dr. Athanassios Kourouklis
Business School

WEST of SCOTLAND

Operations management:
An introduction
Key questions:
What is operations management?
The strategic role and objectives of
operations
Operations strategy and decision areas

Operations management:
Some definitions
An organization is a co-operative goal
realizing unit in which participants
consciously enter into a mutual
relationship and work together in order to
attain common goals
is an instrument to make products (tangible)
services (intangible)

Operations Management;
Some definitions
The operations function of the organization
is the arrangement of resources which is
devoted to the production of its goods and
services
Operations: a function or system that
transforms inputs into outputs of greater
value

Product/ service mix and design

Most companies deliver a mix of both
products and services
The product service mix will influence
the companys competitve position and
the task of operations

Operations in the organization

(functional view)
Environment

Organization
Marketing
OPERATIONS
Finance

Product
service
development

Porters value chain

Company infrastructure
SUPPORT
ACTIVITIES

Human resource management

Technology development
Procurement

PRIMARY
ACTIVITIES

Inbound
logistics

Operations

Outbound

Marketing

Customer

logistics

Sales

Service

The transformation process

model
INPUTS
(Resources)

TRANSFORMATION
PROCESS

Examples of operating systems:

physical - manufacturing
location - transportation
exchange - retail
physiological - health care
psychological - entertainment
informational - communications

OUTPUTS
(Goods/Services)

Generic functions of operating

systems
Five generic functions:
Transportation
Transformation
Verification
Storage
Control

Product/service operating
system: generic model
INFO
TRANSFORMATION
INFO IN

INFO
STORAGE

INFO
VERIFY
INFO
OUT

TRANSPORTATION

CONTROL

MATERIAL
TRANSFORMATION
MATERIAL
IN

MATERIAL
STORAGE
TRANSPORTATION

MATERIAL
VERIFICATION
MATERIAL
OUT

A typology of Operations
There are four particularly important
characteristics which can be used to
distinguish between different operating
systems:
volume of output
variety of their output
the variation in the demand
the degree of customer contact

A typology of Operations
Variability in skills
Low repetition
Less systemisation
High unit costs

Low

Flexible, Complex
Meet customer needs
High unit costs

High

VOLUME

VARIETY

High repeatability
Capital intensive
Systemisation
Specialisation
Low unit costs

High

Routine
Standardised
Regular
Low unit costs

Low

Flexibility
Anticipation
High unit costs

High

VARIATION IN DEMAND

Low

Customer perception
High variety
Interpersonal skills
High unit costs

High

CUSTOMER CONTACT

Low

Stable
Routine
Predictable
High utilisation
Low unit costs
Time lag
Standardised
High staff
utilisation
Low unit costs

The role of Operations

Function
Operations as Implementer
Operations as Support
Operations as Driver

Contribution of the Operations

Function
Redefine the
industrys
expextations

Give an
operations
advantage
Be clearly the
best in the
industry

Link strategy
with operations

Correct
problems

Internally
supportive

Be as good
as
competitors

Adopt best
practice

Externally
neutral

Stop holding
the organisation
back
IMPLEMENT

Externally
supportive

Internally
neutral
SUPPORT

DRIVE

Characteristics of Effective
Organizations

adaptability

flexibility

efficiency

Characteristics of effective
organizations
Efficiency: organizing for routine
production
High quantity of product
High quality of product
High O/I Ratio
Continuously improving current routines

Characteristics of effective
organizations
Flexibility: organizing to cope with
unexpected turns of events
Quick handling of emergencies and sudden
crises
Quick response to sudden overloads and unusual
demands

Characteristics of effective
organizations
Adaptability: organizing to change
routine
Breaking old routines
Anticipating problems and developing timely
solutions to them
Staying abreast of new methods applicable to
the activities of the organization
Prompt acceptance of solutions
Widespread acceptance of solutions

Performance objectives
The operations function contributes to
achieving an operations- based
advantage through some basic
performance objectives
cost
time
flexibility
quality

Performance Objectives and

the Operations input
Cost
- price
Quality - quality conformance
- quality of design
Time
- delivery reliability
- delivery speed
- time to market (new products/services)
Flexibility - demand variation
- customization

What is Quality
Product /service specification
Determining customers needs and
embodying these in the design
specifications of the range of products
and services on offer
Quality conformance
Consistently meeting the product and
service specification

The Quality Offering

What
a company sells

What the
customers
Want / expect

Product or
Service
specification

What operations
needs to provide
consistently

Order-winning and qualifying

objectives
Order -winning factors are those
things which directly and significantly
contribute to winning business
Qualifying factors are those aspects
of competitiveness where operations
performance has to be above a
particular level just to be considered by
the customer

What Do the Terms Quality, Speed, Dependability,

Flexibility and Cost Mean in the Context of
Operations?
Which enables you to do things cheaply (cost advantage)?
Which enables you to change what you do (flexibility advantage)?
Which enables you to do things quickly (speed advantage)?
Enables you to do things on time (dependability advantage)?
Being able to do things right (quality advantage)?

The benefits of excelling

Minimum price, highest value
Cost
Quick
delivery

Dependable
delivery
Speed

Fast
throughput
Error-free
processes
Quality
Error-free
products and
services

Dependability

Minimum cost,
maximum value
Reliable
operation
Ability to
change

Flexibility
Frequent new
products,
maximum
choice

The strategy hierarchy

Key strategic
decisions

Influences on
decision making

Corporate
strategy

What business to be in?

What to acquire?
What to divest?
How to allocate cash?

Economic environment
Social environment
Political environment
Company values and ethics

Business
strategy

What is the mission?

What are the strategic
objectives of the firm?
How to compete?

Customer/market dynamics
Competitor activity
Core technology dynamics
Financial constraints

Functional
strategy

How to contribute to the

strategic objectives?
How to manage the
functions resources?

Skills of functions staff

Current technology
Recent performance of the
function

Operations Strategy
Performance Objectives
(trade-offs,time and targets)

Operations
resources

Operations Strategy
Content

OPERATIONS
STRATEGY

Market
requirements

Operations Strategy
Process

The Market Perspective on

Operations Strategy
Customer
needs

Performance
objectives

Market
Positioning

Competitors
actions

The Resource Perspective on

Operations Strategy
Tangible and
Intangible
resources

Operations
capabilities

Operations
processes

Operations
strategy
Decision areas

The Strategic Reconciliation

RESOURCES
CAPABILITIES
OPERATIONS

Understanding
resources and
processes

OPERATIONS
STRATEGY
DECISION AREAS

Strategic
decisions

PERFORMANCE
OBJECTIVES

Required
performance

CUSTOMER
MARKET
COMPETITORS

Understanding
markets

Relative importance of
performance objectives
The influence of the
organizations
customers

The influence of the

organizations
competitors

The relative
importance of each
performance objective
to the operation

The stage of the organizations

products and services in its life
cycle

The impact of the product life

cycle
Stage

Introduction

Growth

Maturity

Decline

Volume

Low

Rapid growth

High and level

Declining

Customers

Innovators

Early adopters

Bulk of market

Laggards

Competitors

Few/none

Increasing
number

Stable number

Declining
number

Variety of
product or
service

High
customization

Increasingly
standardised

Emerging
dominant types

Commodity
standardization

Likely order
winners

Performance or
novelty

Availability of
quality products
and services

Low price,
dependable
supply

Low price

Likely order
qualifiers

Quality, product
range

Price, product
range

Product range,
quality

Dependable
supply

Operations
performance
objectives

Flexibility
Quality

Speed
Dependability
Quality

Cost
Dependability

Cost

The nature and content of

operations strategy
The content of
operations strategy
A statement of the
principles and policies
which guide the operations
activities

Prioritised performance
objectives for each
product/service group

The process of
operations strategy

The way in which the

guiding principles and
policies are developed

Strategies for each

decision area

Design

Planning and
control

Improvement

Operations strategy:
Relationships
Corporate Strategy
Future directions

Competitive Priorities

Operations Strategy
Positioning strategy
Process focus
Intermediate focus
Product focus
Strategic Choices

Design Decisions Operating decisions

Positioning strategies
Project Process
Process focus
Jumbled
flows

Jumbled,
but with
some
dominant
flows

Batch Process

Intermediate
focus

Product focus

Line Flows
Single
product

Line Process

Low volume,

Moderate volume

Continuous
Process

High volume

Operations strategy decision

areas and their impact
Q
New product/service development

Facilities strategy

Workforce and organization strategy

Inventory strategy
Planning and control systems
Improvement process strategy
Failure prevention and recovery

Capacity adjustment strategy

Supplier development strategy

Vertical integration strategy

Technology strategy

How operations strategies are

put together
Identify what is wanted in the market place.

Establish how well the operation performs versus its competitors.

Identify what the operation needs to do better.

Identify how the operation could do these things better.

Implement the strategy.

Operations management and

strategy: a model
Strategic objectives
PHYSICAL
RESOURCES
INFORMATIONAL
RESOURCES

FINANCIAL
RESOURCES
HUMAN
RESOURCES

Operations
Strategy
System
Design

Continuous
Improvement

Planning/
Control

Competitive
priorities

GOODS
SERVICES

The evolution of Operations

Management
From Adam Smith
to

Virtual companies

Issues and trends

global markets
product variety and customization
more services
emphasis on quality
flexibility
advances in technology
worker involvement
environmental and ethical concerns