MG202
OPERATIONS
MANAGEMENT
Course Book
School of Management and Public Administration
Faculty of Business and Economics
The University of the South Pacific
Produced by the University of the South Pacific, Suva, Fiji, 2008
First produced January 1999
Revised July 2008
Reprinted July 2011
Course development and production team for 1999
Course writer
Subhash Appana
Editor
Jennifer Evans
Course development assistant
Padric Harm
Text processor
Seni Nabou
Cover design
USP Media Centre
Minor adjustments team for 2000
Course writer
Instructional designer
Editor
Course development assistant
Text processor
Cover design
Subhash Appana
Josephine Osborne
Jennifer Evans
Padric Harm
Sera Rokodi and Pranita Kumar
USP Media Centre
Course book team for semester 2, 2008
Course writer
Subhash Appana
Instructional designer
Anare Tuitoga
Course development assistant
Kerishma Seth
Text processor
Susana Sanipati
This material has been prepared by the University of the South Pacific for use by students
enrolled in the course for which it was developed.
It may contain copyright material copied under the provisions of the Fiji Copyright Act 1999 or
under license from rightsholders or their agents. Copyright in material prepared by USP is owned
by USP.
This material cannot be sold or copied for further distribution without the University’s
permission. Where provided in electronic format, it can only be printed by or for the use of the
student enrolled in the course.
MG202(CBK) 22008
ii
CONTENTS
UNIT 1:
Introduction to operations management
1.1
UNIT 2:
Historical development of operations management
2.1
UNIT 3:
Operations strategy and competitiveness
3.1
UNIT 4:
Forecasting demand
4.1
UNIT 5:
Product design and process selection
5.1
UNIT 6:
Facility location and layout design
6.1
UNIT 7:
Operations scheduling and control
7.1
UNIT 8:
Production planning
8.1
UNIT 9:
Materials management
9.1
UNIT 10:
Quality management
10.1
UNIT 11:
Japanese approaches to operations management
11.1
BIBLIOGRAPHY
11.29
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Introduction
The significance of OM
Management has a number of functional areas. A typical organisation has a
finance, marketing and operations function. Operations management (OM) is
where the organisation’s goods and services are produced and provided. It is a
particularly important functional area involving, in virtually all organisations, the
largest amount of total organisational resources. This does not mean, however,
that operations is more important than other functions, like marketing, human
resources management, finance, etc. On the contrary, operations is best viewed as
one of the essential functions of any organisation.
The following trends have become focal points, not only in OM but also in the
field of management in general, largely because of increased competition:
 a quality focus (as judged by the customer) at every transformation point;
 a philosophy of continuous improvement;
 the use of teamwork for improved production and delivery of products; and
 flexibility in production/processing for fast delivery.
It is in OM, however, that these techniques have particular significance.
Literature on Japanese industries, focusing on what contributed to and directly
led to Japan’s continued industrial success since the late 1980s, shows that
development has been centred on Japanese manufacturing techniques and human
resources management. The same has been cited for the success of leading
manufacturers in the United States of America. Furthermore, it is widely accepted
today that no service organisation can be considered excellent without having
sound operations management. OM, therefore, has strategic significance for the
competitiveness of any organisation having a business and/or performance focus.
This is of particular significance for organisations in this region. The South
Pacific business environment has been undergoing drastic changes that have
made previous management practices totally outdated. With the advent of
deregulation and its accompanying competitive onslaught, organisations need to
focus very closely on the efficiency of their operations. For example, the Training
and Productivity Authority of Fiji (TPAF) has taken various steps in assisting
organisations in improving their productivity levels through better management
practices. The bulk of the proposed practices are OM techniques. These
techniques are also being promoted and encouraged in other countries of the USP
region.
On the cover of the MG202 course materials, you will have noticed photographs
of different parts of a typical production plant. These photographs were taken at
Fiji’s Carlton Brewery Ltd.. I have arranged them logically to show you the
different stages in the bottling of Fiji Bitter. You will note that the photographs
have been arranged in a U-shape. This is one of the most widely used layout
designs. The layout at Carlton Brewery, however, is a little different
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with attempts being made to accommodate the different machines within as little
space as possible without negatively affecting the flow of human traffic.
Course content
MG202 looks at various principles and techniques that are important for good
OM. The Coursebook contains a total of eleven units focussing on core areas of
interest in operations management.
Unit 1: Introduction to operations management
This unit introduces you to the field of operations management. Some definitions
are considered closely and we find that it is the function that creates the firm’s
primary products (goods and/or services) through the transformation of inputs
(raw materials, supplies, etc.) into desired outputs (goods and/or services) using
operations resources like people, equipment, factories, etc. This unit also
examines how value is added to the inputs, the differences between goods and
services, and the measure of productivity. Finally, it focuses on the skills and
activities of an operations manager. The significance of this cannot be overemphasised, given the role of OM within the organisation.
Unit 2: Historical development of operations management
Unit 2 takes us through the history of OM. We find that even though much of the
progress in operations management has been made in the twentieth century,
earlier developments have played an important role in the way that OM has
evolved over time. Here we follow operations management through the Industrial
Revolution in England, to the spread of factories in the USA. Our focus is on the
numerous individuals who made important innovations and contributions to the
development of scientific management and operations management, as well as
the Japanese contributions to the development of OM. The unit is concluded by
following the phenomenal growth of services in the economies of industrialised
nations and the significance it has acquired.
Unit 3: Operations strategy and competitiveness
In unit 3, we learn to define mission and strategy and link it to functional strategy
in organisations. Here we follow the emergence of operations strategy in the late
1960s and how this emergence contributed to companies’ competitive success.
Then we describe the four basic types of operations strategy commonly used by
companies to gain competitive advantage in the marketplace. Some light is also
thrown on the vital role of quality and its implications for the organisation.
Unit 4: Forecasting demand
In unit 4, the focus moves to the influence of the environment on organisational
operations. Organisations are always faced with some degree of uncertainty in the
environment that they operate in. In the face of this uncertainty, managers try to
make reasonable estimates of what will happen in the future. This is the role of
forecasting. In this unit, we examine the different factors that affect forecasting
demand. Then we follow the different types of forecasts and learn about a variety
of forecasting models such as moving averages and exponential
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smoothing. Finally, we learn how to evaluate the accuracy of a forecast and
follow briefly the computer’s role in forecasting.
Unit 5: Product design and process selection
In unit 5 we look at the important question of how to design a product and which
process to use to produce it in the best possible manner. Product design and
process selection are two very important strategic decisions that have
implications for all subsequent operations decisions. Here we learn about product
and service design approaches and process selection. The traditional product
design approach is described and its limitations and disadvantages discussed.
Then, the team approach and quality deployment methodology is presented.
Furthermore, various types of production and service delivery processes are
identified and described.
Unit 6: Facility location and layout design
Following on from our discussion in unit 5, we focus on identifying a location for
the production process chosen. Then we decide how to effectively arrange the
departments, processes and their related equipment within the facility. In this unit,
we learn to identify the best location for a facility, as well as the most efficient
layout. We study some of the techniques used in practice to evaluate location
alternatives and to plan layout designs. We then follow some of the major layout
types and discuss the advantages and disadvantages of each. Finally, we attempt
to identify the different objectives and factors that affect service layouts and
select the appropriate layout for service organisations.
Unit 7: Operations scheduling and control
Unit 7 takes us on to the actual carrying out of operations. Here we focus on
scheduling which involves allocating resources (people, equipment, etc.) to the
various tasks (or customers in services) that have been identified to complete a
given job. These tasks have to be processed in a particular sequence to maximise
operational efficiency. In this unit, we consider first the importance of scheduling
and follow it briefly in job-shop types of operations. We then look at a number of
established rules that can be used in different situations to schedule operations.
Finally, we follow in some detail the scheduling problem in services.
Unit 8: Production planning
Unit 8 takes us into production planning. This is a crucial part of the overall
running of operations in any organisation. First we look at aggregate planning
and then link it to the master schedule, which drives the actual production run.
We focus on managing both independent and dependent demand inventory. We
find that planning is closely linked to control in operations in the organisation,
and is necessary to ensure both efficiency and effectiveness in operations.
Unit 9: Materials management
Unit 9 focuses on materials management i.e. the management of materials that
are used to produce an organisation’s output. A major part of the inputs that are
used for the conversion of inputs into outputs in operations management
comprises materials. In this unit, we try to establish why good management of
materials is essential for organisational efficiency and effectiveness. Firstly, focus
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is on the important role of materials handling and some ways in which materials
can be handled. Then the unit looks in some detail at the purchasing process,
which has crucial cost and quality implications. Finally, management of inventory
is considered from a time perspective.
Unit 10: Quality management
Unit 10 covers in some detail the role of quality in OM. We go briefly through the
history of quality management and then focus on quality as an OM strategy. The
cost of quality is evaluated in relation to its value to the organisation. Then focus
moves onto how quality can be included in designing the product or service. This
is an acute feature of total quality management (TQM) because TQM does not
consider quality as a separate function. We also consider briefly the weaknesses
or shortcomings of conventional design approaches for contrast. Finally, we focus
on quality control in the process. Some control techniques are introduced in this
regard.
Unit 11: Japanese approaches to operations management
Unit 11 differs from the previous units in this Coursebook because it does not
follow the textbook. Here the focus is on some of the later OM techniques that
organisations have been using to:
 minimise costs;
 maximise quality levels; and
 provide timely output for competitive survival in today’s environment.
There are various issues that have come to the fore in recent years in the field of
OM that help organisations achieve these three strategies. A number of Japanese
approaches that have been used successfully to improve operations efficiency and
effectiveness are highlighted here. These include just-in-time management, total
quality control, kaizen or continuous improvement and small group activity. We
conclude the unit with a comparison of the typical US-type factory with the
typical Japanese-type factory. This distinction has, however, become somewhat
blurred as organisations have taken steps to respond to the challenges of the
1990s.
Acknowledgements
I have drawn extensively on my research and experiences in Japan to prepare this
course. I wish, therefore, to acknowledge the contribution of The Japan
Foundation in sponsoring me as a Fellow between 1994 and 1995 in upgrading
my knowledge and skills in the field of operations management. Without that
fellowship, my expertise in OM, and therefore the quality of the Coursebook,
would have been much lower. I wish also to highlight the contribution of my
mentor in Japanese Studies, Professor Robert J. Ballon, who not only made
available to me the facilities at the International Management Development
Seminars (IMDS) of Sophia University but also allocated hours of his precious
time to discuss the details of my research and findings in Japan.
In addition to this, I have used a lot of local cases throughout the Coursebook.
Some of you will be able to identify very closely with the cases I have used as
they are very common in nature. I have made a point of using a local factory for
the cover of the course materials as the lack of Pacific regional context in
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available textbooks creates an acute problem in teaching. I wish, therefore, to
sincerely acknowledge the assistance provided by Mr. Joe Rodan (Marketing
Manager) of Carlton Brewery (of Fiji) Ltd. for having allowed us to photograph
and use CBF on our cover.
Your challenge
Finally, this course is intended to introduce students to the field of OM and create
an appreciation of the significance of OM decisions. After going through it, you
should be able to look at operations in almost any organisation and identify
problems within it. This is because the pursuit for the perfect operations system is
a never-ending journey of discovery. In addition to this, you should be able to
propose improvements that would enhance the organisation’s efficiency and
effectiveness. How do you like that for a challenge? Remember to consider each
and every OM issue and problem in practical terms. That is the key to good
operations management. Go forth and see how you fare!
Subhash Appana
Lecturer in Management and Business Studies
The University of the South Pacific
Suva, Fiji.
5
Guide to Using the Coursebook
Your study of the Coursebook will be much more effective if you are aware of
helpful features in the way the material is presented.
The units
The course is divided into 11 units, each of which looks at a topic in detail.
Each unit in the Coursebook follows a pattern. At the beginning is a table of
contents, which lists the main headings of the topic. You should use the contents
page to help locate particular information and gain a general idea of what each
unit is about.
Following the contents page is an overview, a statement of your learning
objectives and a suggested time frame for you to study the contents of the unit.
Read these sections first as part of your understanding of each unit’s overall
structure and what you are expected to achieve after studying the unit. The time
frame will help you to plan your studies, but you should regard the suggested
time as a guide only as each student has his/her own personal pace of study.
Readings from your textbook
The main part of each unit focuses on a topic of operations management. The
discussion of each topic is supplemented with references to your textbook. The
readings from your textbook are designed to expand and explain in more depth
the information presented in the main part of each unit. You should take your own
notes on each of the textbook readings and if you have any difficulty with any of
the content, discuss it with your course coordinator at the satellite tutorials or
write to him directly.
This icon indicates
that you are
required to read
from your textbook.
Case studies
To help you understand the information presented in each unit, a number of case
studies have been included. These case studies are to help you begin applying the
concepts and techniques of operations management to what is happening in
organisations on a day-to-day basis. Hopefully, this will enable you to see the link
between the theory and practice of particular concepts and techniques and
provide a means of learning by doing.
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Activity
At various places throughout the unit, you will see this icon:
This indicates an
activity that you are
required to stop and
answer.
These questions are intended to help you monitor your understanding of the
content and help achieve the learning objectives outlined for each topic. The
activities are based on the information presented in the textbook and unit and may
also ask you to draw on your own personal experiences and knowledge of
operations management “situations or examples”.
You will find that usually space is left in the Coursebook for you to complete
these activities. However do not limit yourself to the space provided. Whenever
you work from the Coursebook always have your exercise book with you for note
taking.
Summary
At the end of each unit is a summary, which provides an overview of the main points
discussed.
Key terms
As part of the summary, you will also find a list of key terms. You should ensure
that you understand the meaning and use of these terms as they apply to
operations management.
Review Questions
At the completion of each unit, we have provided a set of review questions that
are intended to help you reflect on your learning of the content presented. None
of the work has to be submitted, but by doing the questions you could discover
problems that you need to follow up by re-study, discussion with friends or
colleagues, or at a satellite tutorial or by contacting your course coordinator.
This icon indicates a set of
review questions for a
particular unit, that you
should answer.
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When you have finished a unit, check your mastery against the learning
objectives at the beginning of the unit. If you feel you have achieved all the
objectives proceed to the next unit. If, after reflection, you feel that you are still
confused with some of the information, take some remedial action: review the
sections you are having difficulty with or raise your concerns at the next satellite
tutorial or by writing directly to the course coordinator.
Stop now and spend a few minutes looking through this Coursebook
and familiarise yourself with the organisation and features of each unit
before proceeding to unit 1.
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