Kamal Subedi

Operational Management

Contents

• Operational objectives• factors affecting the operational objectives• Heritage of operational management• Ethics and social responsibility• Strategic role of OM

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Operations Objectives

• The operational objectives are often termed as tacticalobjectives or short term goals whose achievement brings anorganization closer to its long term goals.

• The operational objectives are the path for the achievement ofstrategic objectives of the farm.

• Operational objectives are set by the middle level managersbased on the organizational aims.

• The SMART operational objectives helps in the achievementof any organizational goals in efficient manner.– Smart, Measurable, Attainable, Realistic and Time constrained.

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Operational Objective

• The following are the operational objectives of the firm.– Customer service objective

• Manufacturing of goods of given, requested or acceptablespecification

• Supply of goods to customer as per their needs• Service quality

– Resource utilization objective• Product/service design• Process design• Product or service quality• Adaptability• Efficiency and effectiveness

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Factors affecting the operational objectives

• Objectives must be reviewed and changed constantly. As theobjectives of the firm are directly influenced by the internal aswell as external factors.

• So the organization need to change their objective in responseto the change in the environment.

• The internal factor of affecting the objectives are:– Amount of available finance– Size of an organization– Customers– Owners and managers

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Factors affecting the operational objectives

• The external factors affecting the operational objectives are:– Technology– Governmental regulations– Competitors

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Heritage of Operations Management

• Division of labor (Smith, 1776)• Standardized parts (Whitney, 1800)• Scientific management (Taylor, 1881)• Coordinated assembly line (Ford 1913)• Gantt charts (Gantt, 1916)• Motion study (the Gilbreths, 1922)• Quality control (Shewhart, 1924)

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SCIENTISTS

Adam SmithHe suggested that the hugeincreases in productivityobtainable from technologyor technological progress arepossible because human andphysical capital are matched,usually in an organisation.

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SCIENTISTS

Eli WhitneyWhitney's defenders haveclaimed that he inventedthe American system ofmanufacturing thecombination of powermachinery, interchangeableparts, and division of laborthat would underlie thenation's subsequentindustrial revolution.

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SCIENTISTS

Frederick Winslow TaylorHe developed the theory ofmanagement that analyzes andsynthesizes processes, improvinglabor productivity.

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SCIENTISTS

Henry FordHe said that an assembly lineis a manufacturing processin which interchangeableparts are added to a productin a sequential manner usingoptimally planned logisticsto create a finished productmuch faster than withhandcrafting-type methods.

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SCIENTISTS

Henry GanttA Gantt chart is a populartype of bar chart thatillustrates a projectschedule. Gantt chartsillustrate the start andfinish dates of theterminal elements andsummary elements of aproject.

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SCIENTISTS

The GilbrethsThe Gilbreths' motionstudies were morefocused on how a taskwas done, and howbest to eliminateunneeded, fatiguingsteps in any process.

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SCIENTISTS

Walter ShewhartShewhart framed the problem interms of assignable-cause andchance-cause variation andintroduced the control chart as atool for distinguishing between thetwo. Shewhart stressed thatbringing a production process intoa state of statistical control, wherethere is only chance-causevariation, and keeping it in control,is necessary to predict futureoutput and to manage a processeconomically.

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Heritage of OM

• Being the student of OM it is useful to understand howoperations and the study of operations management havedeveloped, and where they are today.

• Operations management has made many contributions to thedevelopment of modern management theory.

• Beginning with scientific management and industrialengineering early in the twentieth century, through to theinfluence of Japanese management at the end of the century.Over time, the set of operations practices used in organizationshas become more complex.

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Contd. Heritage of OM

• Study of operations management only took off after WorldWar II.

• Many influential managers and scholars who shaped themodern practice of management have been associated witheither the practice of operations or the study of operationsmanagement.

• The past trends shows the small scale of the production but thecurrent trend has changed and the products are routinely mass-produced.

• Over time, operations have evolved from craft production, tomass production, to the systems in use today.

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Heritage of OM

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Craft production to batch manufacturing

• The earliest way of organizing the production of goods and serviceswas craft work.

• This is where individuals (or small firms) develop and deliver goodsand services.

• However, the Industrial Revolution signaled the change in methodsof working and the replacement or extension of human and animalpower with machines.

• A key development in the transition from craft production, with itslow volumes and high costs per item, was the development of theAmerican System of Manufactures (ASM). This can be defined asthe sequential series of operations carried out on successive specialpurpose machines that produce interchangeable parts

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From batch production to mass production

• The transition away from craft production continued with thedevelopment of methods for analyzing and improving theorganization of work and the methods for getting work done:this became known as scientific management.

• ‘Taylorism’, as the system of the organization andmanagement of production developed by F. W. Taylor becamecalled, consisted mainly of setting rates for piecework and thepractice of time study and the analysis of the elements of anytask.

• He also proposed changes in the organization of supervisionand management, as well as the workforce itself, including thedevelopment of planning departments for scheduling work.

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Beyond mass production

• During the 1980s the economy of Japan expanded enormously,predominantly due to the competitive advantage that was beingachieved by its automobile and electronics firms.

• It became clear that there were some fundamentally differentmethods being used by these firms in the design and production oftheir goods.

• Part of the reason for these differences in performance was througha fundamentally different approach to organizing work.

• The mass production era promoted specialism, with firms beingorganized into a functional structure.– customers do not buy products from functions, they buy the output of

processes

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Heritage of OM

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Industrial Revolution

• The Industrial Revolution had a significant impact on the waygoods are produced today.

• Before this time, products were made by hand by skilledcraftspeople in their shops or homes.

• Each product was unique, painstakingly made by one person. TheIndustrial Revolution changed all that. It started in the 1770s withthe development of a number of inventions that relied on machinepower instead of human power.

• The most important of these was the steam engine, which wasinvented by James Watt in 1764. The steam engine provided a newsource of power that was used to replace human labor in textilemills, machine-making plants, and other facilities.

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Scientific Management

• Scientific management was an approach to management promoted byFrederick W. Taylor at the turn of the twentieth century.

• Through scientific management he sought to increase worker productivityand organizational output. His concept had two key features. First, itassumed that workers are motivated only by money and are limited onlyby their physical ability.

• Taylor believed that worker productivity is governed by scientific laws andthat it is up to management to discover these laws through measurement,analysis, and observation.

• Workers are to be paid in direct proportion to how much they produce.• The second feature of this approach was the separation of the planning

and doing functions in a company, which meant the separation ofmanagement and labor.

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The Human Relations Movement

• Hawthorne studies The studies responsible for creating thehuman relations movement, which focused on giving moreconsideration to workers’ needs.

• Human relations movement A philosophy based on therecognition that factors other than money can contribute toworker productivity.– Job enlargement, job enrichment are the tools for this

mechanism.

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Management Science

• A field of study that focuses on the development ofquantitative techniques to solve operations problems.

• The first mathematical model for inventory management wasdeveloped by F. W. Harris in 1913. Shortly thereafter,statistical sampling theory and quality control procedures weredeveloped.

• A popular example of such a tool is linear programming.

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The Computer Age

• In the 1970s the use of computers in business became widespread.With computers, many of the quantitative models developed bymanagement science could be employed on a larger scale.

• Data processing became easier, with important effects in areas suchas forecasting, scheduling, and inventory management.

• A particularly important computerized system, materialrequirements planning (MRP), was developed for inventory controland scheduling.

• Material requirements planning was able to process huge amounts ofdata in order to compute inventory requirements and developschedules for the production of thousands of items, processing thatwas impossible before the age of computers.

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Just-in-Time

• Just-in-time (JIT) is a major operations managementphilosophy, developed in Japan in the 1980s.

• It is designed to achieve high-volume production usingminimal amounts of inventory.

• This is achieved through coordination of the flow of materialsso that the right parts arrive at the right place in the rightquantity; hence the term just-in-time.

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Total Quality Management

• Philosophy that seeks to improve quality by eliminating causesof product defects and by making quality the responsibility ofeveryone in the organization.

• Practiced by some companies in the 1980s, TQM becamepervasive in the 1990s and is an area of operationsmanagement that no competitive company has been able toignore.

• Its importance is demonstrated by the number of companiesachieving ISO 9000 certification. ISO 9000 is a set of qualitystandards developed for global manufacturers by theInternational Organization for Standardization (ISO) to controltrade into the then-emerging European Economic Community(EEC).

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Business Process Reengineering

• Business process reengineering means redesigning acompany’s processes to increase efficiency, improve quality,and reduce costs.

• In many companies things are done in a certain way that hasbeen passed down over the years. Often managers say, “Well,we’ve always done it this way.” Reengineering requires askingwhy things are done in a certain way, questioning assumptions,and then redesigning the processes.

• Operations management is a key player in a company’sreengineering efforts.

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Time-Based Competition

• One of the most important trends within companies today istime-based competition— developing new products andservices faster than the competition, reaching the market first,and meeting customer orders most quickly.

• For example, two companies may pro- duce the same product,but if one is able to deliver it to the customer in two days andthe other in five days, the first company will make the sale andwin over the customers. Time based competition requiresspecifically designing the operations function for speed.

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Supply Chain Management

• Supply chain management (SCM) involves managing theflow of materials and information from suppliers and buyers ofraw materials all the way to the final customer.

• The network of entities that is involved in producing anddelivering a finished product to the final customer is called asupply chain. The objective is to have everyone in the chainwork together to reduce overall cost and improve quality andservice delivery.

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• Global marketplace A trend in business focusing oncustomers, suppliers, and competitors from a globalperspective.

• Sustainability A trend in business to consciously reducewaste, recycle, and reuse products and parts.

• Outsourcing and Flattening of the World– Outsourcing is obtaining goods or services from an outside

provider. This can range from outsourcing of one aspect of theoperation, such as shipping, to outsourcing an entire part of themanufacturing process.

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Ethics and Social Responsibility

• Ethics – A set of moral principles or values that governs theconduct of an individual or a group.

• It is the role of the operations manager to ensure that theorganization is ethically and socially responsible withinproduction which can be done by:

• Managing inputs appropriately.– An operations manager should attempt to use inputs that do not

have a serious impact on the environment. To keep down thecosts of production, organizations shouldn’t be tempted to usecheaper, illegal waste disposal methods.

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Ethics and Social Responsibility

• Managing suppliers appropriately.– Organizations should ensure that their suppliers are acting in an

ethically and socially responsible way. The relationship betweenthe organization and suppliers should also be appropriate. It isconsidered to be inappropriate to provide preferential treatmentto suppliers that offer gifts such as free meals, trips orentertainment or to select suppliers based on friendships.

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Ethics and Social Responsibility

• Managing staff appropriately– Organization's facilities and technology contribute to health and

welfare of staff. Irregular or incomplete maintenance ofproduction facilities can result in detrimental consequences. Forexample toxic production such as asbestos mining.

• Managing the customer relationships appropriately.– It is essential that the organization produces goods that are of the

required quality, safe and reliable. Dangerously defective orharmful products can result in the injury or death of consumerswhich does not represent ethical operations.

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Strategic Role of OM

• Strategy is the total pattern of decisions and actions thatposition the organization in its environment and that areintended to achieve its long-term goals.

• Operations strategy concerns the pattern of strategic decisionsand actions which set the role, objectives and activities of theoperation.

• Operations strategy has content and process. The contentconcerns the specific decisions which are taken to achievespecific objectives. The process is the procedure which is usedwithin a business to formulate its strategy.

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Strategic Role of OM

• So the primary role of the operational management is to makethe market opportunities

• And the secondary strategic role of the om are:– Economy and efficiency of conversion of inputs to outputs.

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Thank You