Fundamentals of Operations
Management
Nayyar Butt
Assistant Professor
Management Sciences, Lahore
nbutt@ciitlahore.edu.pk
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Questions???
• What is operations management?
• What are the similarities between all
operations?
• How are operations different from each
other?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What is operations management?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management defined
Operations management is the activity
of managing the resources which are
devoted to the production and delivery of
products and services.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Back office operation
in a bank
Retail operation
Kitchen unit
manufacturing
operation
They are
all
operations
Take-out / restaurant
operation
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A general model of
operations
management
Transformed
resources …
The operation’s
strategic
objectives
Operations
strategy
Operations
strategy
Materials
Information
Customers
Improvement
Design
Input
resources
Transforming
resources …
The operation’s
competitive role
and position
Operations
management
Output
products
and
services
Customers
Planning
and
control
Facilities
Staff
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Prêt a Manger
‘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 …”
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The three basic functions at Prêt a Manger
Nutritional ‘mechanical’ and
aesthetic design of the
sandwiches and snacks
Product /
Service
Development
Marketing
Promotional
activities,
market
research, etc.
Operations
Design, location
and management of
stores and in-store
processes and the
network that supplies
them
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
All operations are transformation processes …
Inputs
Transformation process
Outputs
that transform inputs …
into outputs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some inputs are transformed resources
Some inputs are transforming resources
Transformed
resources …
Materials
Information
Customers
Input
resources
Transformation process
Output
products
and
services
Customers
Transforming
resources …
Facilities
Staff
Outputs are products and services that add
value for customers
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
At Prêt a Manger
Transformed
resources …
Ingredients
Packaging
Customers
Input
resources
Served and
satisfied
customers
Transforming
resources …
Equipment
Fittings
Staff
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Differences within sectors are often greater than the
differences between sectors
Financial services
An account
management centre at
a large retail bank
Financial analyst
advising a client at an
investment bank
Furniture manufacturing
Mass production of
kitchen units
Craft production of
reproduction
‘antique’ furniture
Hotels
Value-for-money
hotel
Lobby of an
international
luxury hotel
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Low
Volume
High
High
High
Variety
Low
High
Variation in
demand
Low
High
Visibility
Low
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Implications
Low
Volume
High
High
High repeatability
Specialization
Capital intensive
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Flexible
Complex
Match customer needs
High unit costs
Implications
High
Variety
Low
Well defined
Routine
Standardized
Regular
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Implications
High
Variation in
demand
Low
Stable
Routine
Predictable
High utilization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit costs
Implications
High
Visibility
Low
Time lag between
production and
consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Implications
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Flexible
Complex
Match customer needs
High unit costs
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit costs
A Typology of Operations
Low
High
High
High
Volume
Variety
Variation in
demand
Visibility
Implications
High
High
High repeatability
Specialization
Capital intensive
Low unit costs
Low
Well defined
Routine
Standardized
Regular
Low unit costs
Low
Stable
Routine
Predictable
High utilization
Low unit costs
Low
Time lag between
production and
consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
BespokeTailors
• 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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Tiptree Christmas Puddings
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Tiptree Christmas Puddings
• Turns fruit, flour etc
into puddings
•
•
•
•
Medium volume
Low variety
Very seasonal demand – variation
Low/No customer contact
• Quite specialised technology, semi-skilled
labour, flow from stage to stage
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Millau Viaduct – Foster and Partners (Architects)
• Turns information into a
buildable design
• Low volume – one-off
• High Variety – each
job different
• Variable demand but
no seasonal pattern
• Medium customer contact
• Highly skilled staff, basic technology, time-critical project
process
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Power Station
• Turns coal and gas into
electricity
• No variety
• High volume
• Some variation in
demand
• Very capital intensive, specialised technology; few staff,
doing maintenance jobs.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
COMSATS Undergraduate Degree
• Turns new students into
knowledgeable and skilled
graduates
• Volume – medium
• Variety – medium
• Visibility – medium
(But depends on which activity)
• Mostly skilled staff and simple technologies; complex
flow and scheduling
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations Management Definition
“the activities, decisions and responsibilities of
managing the production and delivery of
products and services”
(Slack et al, 2004)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The Transformation Process
Transformed
resources
INPUT
Transforming
resources
Business environment
Transformation
Process
OUTPUT
Goods
and
services
Business environment
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transformation Characteristics
• transformed vs transforming resources
• materials, information, customers
• physical form, location, possession and
state
• product-service continuum
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Product-service continuum
Psychotherapy
Clinic
Management
Consultancy
Computer
Systems Services
Restaurant
Specialist Machine
Tool Maker
Aluminium
Smelting
Crude oil
production
Pure Goods
Pure Services
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transformation types
Operation
Transformed
resource
Type of
change
Product
Service
Car
Manufacturing
Student
counselling
Retail banking
Train journey
Roadside car
recovery (AA)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Macro and micro operations
Macro operation
Micro operations
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Vital Dimensions of
Operations…..
volume
variety
variation
visibility
(a.k.a.customer contact)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Applying the four Vs
Haute
couture
clothing
Making PC
keyboards
Student
counselling
Suburban
rail service
Volume
Variety
Variation
Visibility
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Process Choice
Variety
Professional services
Job
Batch
Service shops
Line
Mass services
Continuous
Volume
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Model of Operations Management
The operation’s
strategic
objectives
Business environment
The strategy
of the operation
Operations
Strategy
Transformed
resources
The operation’s
competitive
role & position
Operations
Management
INPUT
Transforming
resources
DESIGN
IMPROVEMENT
OUTPUT
Goods
and
services
PLANNING
& CONTROL
Business environment
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Process Flowcharting
Operation (an activity
that directly adds value)
Beginning or end of process
Inspection (a check of
some sort)
Activity
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 “Scientific Management”
Process mapping symbols derived
from Systems Analysis
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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25
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27
28
29
30
31
32
eat lunch
go to bedroom
prepare for sailing
go to lake
await instructor
check equipment
sailing
go to bedroom
change
go to dining room
eat
wait for camp fire
camp fire
go to bedroom
prepare for bed
go tow ash room
go to bed
go to toilet
go to bed again
33
sleep
Process flow chart for one day on an adventure holiday
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
‘Two handed’ process chart
Left hand
Wait
Right hand
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
Transfer grasp
Wait
Inspect
Transfer grasp
Put aside
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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:
a)
b)
c)
d)
Low cost
Speed (i.e. getting up as late as possible)
Dependability (i.e. arriving on time)
Quality
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007