Introduction to Operations
Management
• Objectives of lecture:
– To understand what is operations management
– Describe the role of OM within the organisation
– To understand the relationship between operations
management and the division of labour
– To know the constitutive elements of an operation
system
– To discuss the difference between products and
services
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Michel Leseure
What is Operations Management?
• OPERATIONS MANAGEMENT is the design
and operations of production/service systems
• Without operations management:
– A normal queue at a bank would take 1 to 2 hours …
– A 3 hours ferry crossing could require 9 hours, if not
several days!
– The Eurostar would take 15 hours to go from London to
Paris…
– Mail would rarely be delivered…
• In other words:
– Unless we could totally revise our every day’s
perceptions of time and performance…
– … we could not live in such a world
MGT3303
Michel Leseure
Contemporary Issues
• Shift in balance of power to consumers
– Achieving higher levels of productivity
•
•
•
•
Creating higher quality products
Delivering better customer service
Achieving shorter delivery times
Reducing labor and material costs
• Globalization of business and markets
• E-commerce
•
•
•
•
From a primary sector to a secondary sector economy
From a manufacturing to a service economy
E-service economy
Case of developing economies: can we leap-frog the
manufacturing stage?
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Michel Leseure
International Division of Labour
Source: From Joseph E. Stiglitz, Principles of Microeconomics, 2nd ed. (New York: W.W. Norton and
Company, 1997), p. 58.
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Michel Leseure
The Value Chain and Its Support
Functions
Role of OM within an Organisation
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Michel Leseure
Division of Labour
• The objective is to specialise jobs by reducing them to their
most elementary tasks
• Results from the simultaneous application of two principles
– horizontal division of labour
• (Smith, Babbage)
– vertical division of labour
• (Taylor, introduction of management science; Gilbreth, time and
motion studies)
• The vertical division of labour implies:
– A design and planning activity
– A control activity
– A co-ordination role for operations management
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Michel Leseure
The Transformation Process within
OM
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Michel Leseure
Input-Transformation-Output
Relationships for Typical Systems
Components are also called resources
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Michel Leseure
OM and the Service Industry
• Application of OM to Service Operations
– Batch cooking operations at McDonald’s
– Telephone Banking
– Call Centres
Service Product Good
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Michel Leseure
Most Products Are a “Bundle”
of Goods and Services
Exhibit 1.8
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Michel Leseure
Differences Between
Goods and Services
• Goods
– Tangible
– Can be
inventoried
– No interaction
between
customer and
process
1-6
• Services
– Intangible
– Cannot be
inventoried
– Direct interaction
between
customer and
process
MGT3303
Michel Leseure
Product Delivery Systems
• Manufacturing Processes - customer are
separate from the place of production both
geographically and in terms of time
– Exceptions: B2B transactions
Materials
Manufacturing
process
Goods
Customer
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Michel Leseure
Service Delivery Systems
• There are two basic structures of
service delivery system.....
– 1. where customers participate
– 2. where customers' goods are processed
Goods
Customer
Service
delivery
system
Customer
Service
delivery
system
Customer
Processed
Goods
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Michel Leseure
Front & Back Office
Key feature of service industry. Nowadays front and back
offices are often separated geographically - and may even be
in different continents Front Office - Servers
Customers
Division of labour
(receptionist / dispatcher /
cashier etc.)
Back Office
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Michel Leseure
Suggested Homework
• Is a public service (e.g. land registry, customs,
ONE) an operations system?
– How does it differ from a business operations
system?
• Question 1-2 p. 27
• Have the globalisation of operations taken place
yet in Morocco? How, Why, Examples?
• Question 1-8 p. 27
• Question 1-15 p. 27
• Case Problem 1.2 p. 29
MGT3303
Michel Leseure