An Introduction to Operations Management

The Joy of Operations

Ajay Das

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317503293
• Edition: 1
• Topic: Commerce
• Subtopic: Commerce Général

An Introduction to Operations Management: The Joy of Operations covers the core topics of operations management, including product and service design, processes, capacity planning, forecasting, inventory, quality, supply chain management, and project management. Das provides a clear, connected, and current view of operations management and how it relates to a firm's strategic goals.

Students will benefit from the real-world scenarios that foster an understanding of operations management tasks. Without relying heavily on statistics and mathematical derivations, the book offers applied models and a simple, predictable chapter format to make it easy to navigate.

Students of introductory operations management courses will love this practical textbook. A companion website features an instructor's manual with test questions, as well as additional exercises and examples for in-class use.

1
Operations Management and You

Chapter Take-Aways

• A practical understanding of the purpose and tasks of operations management
• Jobs—the benefit of studying operations management
• How to evaluate operational performance
• What’s happening now in operations management

Operations Management and You: A Road Map

1.1 What, exactly, is operations management?

1.1.1 A way to think about operations

1.1.2 What operations managers do

1.1.3 A brief history of operations management

1.2 Why is operations management important?

1.2.1 The importance of operations management to business

1.2.2 Why is operations management important for you?

1.2.3 Where does operations management reside in the firm?

1.3 How is it done?

1.3.1 The tasks of operations management

1.3.2 Operations management strategy

1.4 Was it done right?

1.4.1 Strategic KPI dashboard

1.4.2 Operational KPI dashboard

1.4.3 Productivity of work systems

1.5 Current trends in operations management

1.5.1 Supply chain management (SCM)

1.5.2 Service science

1.5.3 Lean operations

1.5.4 Sustainability

1.5.5 New technologies in operations

1.6 How to read the book

End of chapter

• What have we learned?

• Discussion questions

• Suggested class project

Introduction

Welcome to Operations Management! Let’s take a look at what it’s about.

1.1 What, Exactly, Is Operations Management?

Speaking broadly, the operations function designs, makes, and delivers an organization’s products or services. It gathers materials and resources and transforms them into finished goods and services through value-adding conversion activities. Operations management (OM) is the design, management, and improvement of the systems and activities involved in this task.

1.1.1 A Way to Think about Operations

Operations comes from the Latin word ‘opus,’ meaning work. Operations management is the management of that work—to make it run well and to improve on it. The scope of the operations function of any business can be described through a simple diagram:

Figure 1.1 A Simple Model of Operations

Operations takes in inputs and converts them using resources to make products/services that customers want. The goal is to do so efficiently and effectively, so as to maximize whatever the organization wishes to achieve—profit, low cost, or high customer service levels. A college takes in fresh high school or transfer students (inputs). The students are typically put through a four-year transformation process where they work with faculty, technology, and each other to be converted into polished, knowledgeable, and highly employable output (graduates). A hospital takes in sick patients as inputs. Their examination and treatment by doctors and nurses, medicines, laboratories, and diagnostic and surgical equipment constitutes the transformation process. Healthy patients are released from the hospital as quality-certified finished products. Likewise, in a Ford plant, operations designs the car, sources steel and car parts, designs the manufacturing process, forecasts and sets production targets, schedules worker shifts, monitors and improves quality, and delivers the car to the dealer. It does so efficiently, effectively, and safely, making it possible for Ford to turn a profit from the revenue it gets from the sale of the car.

Although OM plans and strategizes for business success, it differs from marketing, accounting, and other functions in that it also rolls up its sleeves and plunges right into the fray of making and delivering products and services. As a senior operations Northrop Grumman executive stated, “Operations really is the heart of most companies, because the operations department actually gets the job that the company needs to get done, done.”¹

1.1.2 What Operations Managers Do

Every day in its life, a business has to answer that fundamental question posed by all customers—why should I choose you? Look at the picture below.

Yes, you’re right—the business is a boutique. And how does it seem to be responding to that fundamental question posed by all consumers to a business: “Why should I choose You?”

Look closer. The business seems to be saying, “Choose us because we promise you”:

• Exclusivity—every dress shown is different
• Affordability—a reasonable price
• Quality—good fittings and durable colors
• Availability—the dress will be there when you want it
• Service—friendly expert advice and help
• Location—right off the subway and plenty of safe parking

You can see a group of happy, excited women exiting the store—obviously the business fulfilled the promises it made to its customers. Who delivers on these promises? Operations! Every business makes promises to its customers.

Figure 1.2 Why Should I Choose You?

Source: andresr (2014). Group of women shopping. Retrieved from: http://www.istockphoto.com/photo/group-of-women-shopping-41417898?st=1d22a09. Courtesy of iStock.

OM in Practice

Every Business Makes Promises

Here’s a sampling of promises made by well-known companies:

• Toyota promises efficiency, safety, longevity, innovation: http://www.toyota.com/productleadership/
• Kia promises the “power to surprise” with “exciting and enabling” vehicles: http://www.kia.com/#/about/
• Ritz-Carlton promises to be and always be the “gold standard” in luxury hospitality: http://corporate.ritzcarlton.com/
• Motel 8 promises consistent delivery of eight features in a guest stay: http://www.super8.com/Super8/control/amenities?variant

But not all promises are kept.

Many retailers, including Amazon and Kohl’s, accepted online orders till the last minute during the Christmas 2013 season, promising delivery before Christmas. Packages arrived damaged or late or did not arrive at all. While finger pointing goes on, carriers like FedEx have identified the root causes as faulty labeling, too little time allowed for logistics, and plain old misspeak—packages said to have been shipped were not even handed over to the carrier at the time. Retailer online fulfillment employees were focused on meeting internal shipment rate targets, shifting the problem over to the carriers. UPS and FedEx hiked capacity, rates, and advance notice requirements for 2014.

Lesson: “Don’t overpromise or say we do things that we end up not being able to do.” And consult operations before making promises.

Operations managers deliver on promises that are made by the business to the customer. In doing so, operations essentially focuses on a single, foremost real-world challenge—variability. Customers do not show up in orderly, well-timed fashion. Neither do they all demand the same work or go to the same location. Workers too, do not work at the same pace or quality level all day or all week. Suppliers do not deliver 100 percent on time, quality, cost, or location. Faced with this variability, operations managers act in four ways.

• a) First, by building forecasting systems that attempt to anticipate variability—this, obviously, can never be perfect.
• b) Next, they try to control variability by influencing demand patterns (e.g., doctor appointments, happy hours), controlling worker variability (e.g., worker training and incentives), and managing supplier variability (e.g., information sharing, technical assistance, incentives, and penalties).
• c) Since forecasting and attempts to control variability typically offer limited results, managers build in excess capacity in the system (labor, machines, raw materials) so that peak demand can be met. This leads to waste at times of low demand and costs the business a lot.
• d) Alternatively, managers try to make their operations synch with variability by adding flexibility to work systems. Basically, they convert fixed costs into variable costs. Think of hiring temps, varying worker hours according to demand, training workers to perform different jobs, leasing equipment/hour instead of buying, and buying materials when needed instead of holding inventory. Such actions are not always possible.

Here is an example of what businesses actually expect operations managers to do:

Operations Manager Responsibilities

Here’s a description of what a company may require from its operations managers. Not all tasks are required for all operations managers, but the responsibilities listed are quite representative of what an actual operations manager does on the job.

Job Description: Operations Manager JN: 42570 CACI International (abbreviated)

Dutie...