Introduction incentives.

During the early part of the

twentieth century, automobiles were just
Operations management is commonly defined coming into vogue in the United States. Ford’s
as the administration of the processes used in Model T was such a success that the company
the production of goods and services. All had trouble keeping up with the order for the
businesses depend on operations cars. In an effort to improve the efficiency of
management for its success. A company can operations Ford adopted the scientific
assemble a great marketing team only to fail management principles espoused by Frederick
because its product could not deliver what was Winslow Taylor. Ford also introduced the
promised in the advertisement. A product can moving assembly line. A second concept used
be a good or a service. Many organizations by Ford was the division of labor, which Adam
today provide both. The operations department Smith wrote about in the Wealth of Nations.
is managed by the operations manager who
ensures that the company produces its A number of other pioneers also contributed
product/s according to set standards. World- heavily to this movement, including the
class companies like Ford Motors attribute its following:
success to an effective and efficient operations
management.  Frank Gilbreth was an industrial
engineer who is often referred to as the
History of Operations Management father of motion study. He developed
principles of motion economy that could
“Systems for production have existed since be applied to incredibly small portions
ancient times. The Great Wall of China, the of a task.
Egyptian pyramids, the ships of the Roman and  Henry Gantt recognized the value of
Spanish empires, and the roads and aqueducts nonmonetary rewards to motivate
of the Romans provide examples of the human workers, and developed a widely used
ability to organize for production. The system for scheduling, called Gantt
production of goods for sale and the modern charts.
factory system had their roots in the Industrial  Harrington Emerson applied Taylor's
Revolution. ideas to organization structure and
encouraged the use of experts to
The Industrial Revolution began in the 1770s in improve organizational efficiency. He
England and spread to the rest of Europe and testified in a congressional hearing that
to the United States during the nineteenth railroads could save a million dollars a
century. Prior to that time, goods were day by applying principles of scientific
produced in small shops by craftsmen and their management.
apprentices. Only simple tools were available;  Henry Ford, the great industrialist,
the machines that we use today had not been employed scientific management
invented. Then, a number of innovations techniques in his factories.
changed the face of production forever by
substituting machine power for human power. Whereas the scientific-management movement
Perhaps, the most significant of these was the heavily emphasized the technical aspects of
steam engine, made practical by James Watt work design, the human relations movement
around 1764, because it provided a source of emphasized the importance of human element
power to operate machines in factories. Ample in job design. During the 1930s, Elton Mayo
supplies of coal and iron ore provided materials conducted studies at the Hawthorne division of
for generating power and making machinery. Western Electric. His studies revealed that in
Despite the major changes that were taking addition to the physical and technical aspects
place, management theory and practice had of work, worker motivation is critical for
not progressed much from early days. What improving productivity. During the 1940s,
was needed was an enlightened and more Abraham Maslow developed motivational
systematic approach to management. theories, which Frederick Hertzberg refined in
the 1950s. Douglas McGregor added Theory X
In the earliest days of manufacturing, goods and Theory Y in the 1960s. These theories
were produced using craft production (system represented the two ends of the spectrum of
in which highly skilled workers use simple, how employees view work.
flexible tools to produce small quantities of
customized goods) highly skilled workers using Whereas the scientific management movement
simple, flexible tools produced goods according heavily emphasized the technical aspects of
to customer specifications. work design, the human relations movement
emphasized the importance of the human
The scientific-management era brought element in job design. The scientific
widespread changes to the management of management movement primarily focused on
factories. The movement was spearheaded by the technical aspects of work design while the
the efficiency engineer and inventor Frederick human relations movement emphasized the
Winslow Taylor, who is often referred to as the importance of the human element in job
father of scientific management. Taylor design. Lillian Gilbreth, a psychologist,
believed in a science of management based on collaborated with her husband Frank Gilbreth,
observation, measurement, analysis and and studied the human factor in work,
improvement of work methods and economic particularly worker fatigue in the 1920s. In the
following years, there was a significant computers have had a major impact on
emphasis on worker motivation. Elton Mayo operations management. Moreover, the
conducted studies in the 1930s at Western growing availability of software packages
Electric, which revealed that motivation plays a covering virtually every quantitative technique
crucial role in improving productivity. In the has greatly increased management’s use of the
1940s, Abraham Maslow developed computer,” (Stevenson, 2017).
motivational theories that were later improved
by Frederick Hertzberg in the 1950s. Douglas Below refers to the table presenting a timeline
McGregor introduced Theory X and Theory Y of important events and advancements in the
in the 1960s, which depicted the opposite ends history of operations management.
of how employees view work. Theory X
assumes that workers dislike work and need to Span of Operations Management
be controlled through rewards and punishment
to perform well, which was prevalent in some The operations manager is responsible for the
industries, but was later reconsidered due to management of the following areas needed in
global competition. Theory Y, on the other production: (1) demand forecasting; (2) product
hand, assumes that workers enjoy their work design; (3) capacity management; (4) process
and become committed to it. The Theory X selection; (5) facility layout; (6) inventory
approach resulted in a hostile work management; (7) location; (8) scheduling and
environment, whereas the Theory Y approach (9) quality management. There is
led to empowered and cooperative workers. In interdependence among the areas. A failure in
the 1970s, William Ouchi introduced Theory Z, one area will lead to failure in another. The
which combined the Japanese approach of operations manager should plan and execute
lifetime employment, problem-solving and well to produce a quality product that the
consensus building with the traditional Western company can offer to its customers.
approach of short-term employment,
specialists, and individual decision-making and Operations management encompasses many
responsibility. aspects of an organization, including product
and service design, process selection,
The factory movement in the early 20th century technology management, work system design,
was accompanied by the development of location planning, facility planning, and quality
several quantitative techniques for managing improvement. The operations function includes
industrial processes. One of the first models a wide range of interrelated activities, such as
developed was by F. W. Harris in 1915, which forecasting, capacity planning, scheduling,
was a mathematical model for determining the inventory management, quality assurance,
optimal order size for inventory. In the 1930s, employee motivation, and facility location. An
H. F. Dodge, H. G. Romig, and W. Shewhart at example of a service organization's operations
Bell Telephone Labs developed statistical system can be seen in an airline company,
procedures for sampling and quality control. which includes airplanes, airport facilities, and
L.H.C. Tippett conducted studies in 1935 that maintenance facilities. These activities include
provided the foundation for statistical-sampling forecasting demand, capacity planning,
theory. facilities and layout, scheduling, inventory
management, quality assurance, employee
Initially, these quantitative models were not motivation, and facility location. On the other
widely adopted in industry. However, the hand, a bicycle factory is a different type of
pressures of World War II on manufacturing operation, primarily involving assembly of
output led to increased use of these techniques components and some fabrication work. Key
to improve efficiency and output. After the war, management tasks include scheduling
efforts to develop and refine these quantitative production, deciding on components to make
tools for decision making continued, resulting in or buy, ordering parts and materials,
decision models for forecasting, inventory determining the style and quantity of bicycles to
management, project management, and other produce, purchasing new equipment,
areas of operations management. maintaining equipment, motivating workers,
and ensuring quality standards are met. Both
During the 1960s and 1970s, management types of operations have similarities such as
science techniques were highly regarded in the scheduling, employee motivation, inventory
industry. However, their popularity waned in management, equipment maintenance, and
the 1980s. The widespread use of personal quality assurance, with the goal of satisfying
computers and user-friendly software in the customers. The success of both types of
workplace in the 1990s and 2000s helped to operations depend on short-term and long-term
revive the use of these techniques, making planning.
them more accessible and easier to implement
for companies of all sizes. The operations function encompasses all
activities directly related to the production of
Computers have had an enormous influence goods or provision of services, and can be
on the practice of operations management, found in both manufacturing and service-
particularly in scheduling and inventory control. oriented industries. The role of an operations
Because they are capable of rapid, error-free manager is to make decisions that guide the
computations and keeping track of thousand of system, both in terms of design and operation.
bits of information with instantaneous retrieval, Decisions related to system design include
capacity, location, layout, product and service To further differentiate Good and Services
planning, and equipment acquisition, which
often require long-term commitments and are Goods are physical items that include raw
considered strategic. Decisions related to materials, parts, subassemblies, and final
system operation include management of products.
personnel, inventory, scheduling, project
management, and quality assurance, which are  Automobile
generally tactical and operational. The  Computer
operations manager plays a crucial role in  Oven
system design, as it ultimately determines  Shampoo
factors such as costs, space, capacities, and
quality. They may not make all design Services are activities that provide some
decisions, but they can provide relevant combination of time, location, form or
information to decision-makers. psychological value.

It is the operations manager's responsibility to  Air travel

oversee the production and delivery of goods  Education
or services in the organization. Management is  Haircut
the core job of an operations manager,  Legal counsel
regardless of the type of industry or
organization. Products are typically neither purely service- or
purely goods-based. Many factors affect the
Manufacturing and service industries play design and management of operations
important roles in the economy. Service systems. Among them is the degree of
sectors are the considered largest industry in involvement of customers in the process and
the country with a stunning growth of 9.2 the degree to which technology is used to
percent in 2022 , Among the top five produce and/or deliver a product or service.
contributors to growth in Services were The greater the degree of customer
Financial and insurance activities, which involvement, the more challenging it can be to
increased by 9.8 percent; Transportation and design and manage the operation.
storage, 19.2 percent; Professional and
business services, 10.0 percent; and Technology choices can have a major impact
Accommodation and food service activities, on productivity, costs, flexibility, and quality and
36.1 percent. In addition, service sector customer satisfaction.
workers are on the rise, while manufacturing
workers are on the decline. This decline in
Note: The greater the degree of customer
manufacturing jobs is due to advancements in
involvement, the more challenging it can be to
technology and productivity allowing for fewer
design and manage the operation
workers to produce the same or even more
output, as well as companies outsourcing
manufacturing to other countries with lower Manufacturing and Service Organizations differ
labor costs. These topics will be discussed chiefly because manufacturing is goods-
further in later chapters. oriented and service is act-oriented.

I. Production of Goods versus Delivery of  1.Degree of customer contact

Services  2.Uniformity of input
 3.Labor content of jobs
 4.Uniformity of output
While goods and services frequently go hand in
 5.Measurement of productivity
hand, there are some very simple differences
 6.Production and delivery
between the two, differences that have an
 7.Quality assurance
effect on the management of the portion of
 8.Amount of inventory
goods versus the management of the portion of
 9.Evaluation of work
services. There are also a lot of parallels
 10.Ability to patent design
between the two.
II.Role of the Operations Manager – as to
Production of products results in visible
function.
performance, such as cars, eyeglasses, golf
balls, refrigerators—anything we can see or
touch. It can take place in a warehouse, but it A primary function of the operations manager is
can happen elsewhere. Farming, for example, to guide the system by decision making. they
creates non-manufactured products. On the are consists of:
other hand, service delivery usually requires an
act. Examples of services include a doctor's  System Design Decisions
consultation, TV and vehicle repair, lawn care,  System Operation Decisions
and film screening in a theatre.
System Design Decisions - These are typically
strategic decisions that usually require a long-
term commitment of resources to determine
parameters of system operation
System Operation Decisions - These are processes (e.g., storing, transporting,
generally tactical and operational decisions. repairing).
Examples are:
To ensure that the desired outputs are
 Management of personnel obtained, an organization takes measurements
 Inventory management and control at various points in the transformation process
 Scheduling (feedback) and then compares them with
 Project management previously established standards to determine
 Quality assurance whether corrective action is needed (control).

Operations managers spend more time on The essence of the operations function is
system operation decisions than any other to add value during the transformation
decision area and they still have a vital stake in process is the term used to describe the
system design. difference between the cost of inputs and the
value or price of outputs. In nonprofit
Lastly, the operations manager is the key figure organizations, the value of outputs (e.g.,
in the system. highway construction, police, and fire
protection) is their value to society; the greater
III. Role of the Operations Manager – as to the value-added, the greater the effectiveness
Supply and Demand of these operations. In for-profit organizations,
the value of outputs is measured by the prices
Supply Chains and operations sides deal with that customers are willing to pay for those
the supply and the sales and marketing on the goods or services.
demand.
Firms use the money generated by value-
Note: added for research and development,
investment in new facilities and equipment,
 if Supply > demand = Wasteful and worker salaries, and profits. Consequently, the
CostlyWasteful, Costly greater the value-added, the greater the
 if Supply < demand = Opportunity number of funds available for these purposes.
Loss , Customer Dissatisfaction Value can also be psychological, as
 if Supply = demand = Ideal for the in branding.
organization.
Module 2
IV. Role of the Operations Manager – as to
Supply Chain Introduction

Supply Chain – a sequence of activities and A business can effectively compete in the
organizations involved in producing and marketplace with a good product and service
delivering a good or service design. A product that the company can
produce efficiently and satisfies the needs or
Supply chains are both external and internal to wants of customers is certain to bring profits.
the organization. The external parts of a supply Designing products is process that a company
chain provide raw materials, parts, equipment, should continuously do to achieve long-term
supplies, and/or other inputs to the success and is commonly done through a
organization, and they deliver outputs that are research and development department.
goods to the organization’s customers. The
internal parts of a supply chain are part of the A new design for a product can be proposed by
operations function itself, supplying operations the company’s owner, employee, customer and
with parts and materials, performing work on supplier. It can even be inspired by a
products and/or services, and passing the work competitor’s product. The company should be
on to the next step in the process. open to accepting new ideas and should be
willing to invest in its research and
The figure above provides another illustration development. Successful companies are
of a supply chain: a chain that begins with known to make their research and
wheat growing on a farm and ends with a development department work with operations
customer buying a loaf of bread in a and purchasing departments to ensure that
supermarket. Notice that the value of the products in development can be produced by
product increases as it moves through the the company’s facilities and that the
supply chain components needed can be sourced from
suppliers.
V. Role of the Operations Manager – as
to Transformation Process Concepts in Product and Service Design

The creation of goods or services involves Reverse Engineering is when a product is

transforming or converting inputs into outputs. deconstructed to determine how it was made
Various inputs such as capital, labor, and and what are its parts. Companies that intend
information are used to create goods or to follow a competitor’s product do this.
services using one or more transformation
Standardization is using the same parts for of the majority of people, who have limited
different products of the company. It is incomes and limited living spaces. This is how
commonly used to save on costs and simplify IKEA succeeds in offering well-designed,
purchasing of components. functional products at prices so low that most
people can afford them. In order to make
Robust Design is drawing up a product that is products saleable and right for the IKEA
more durable and long-lasting even when used identity, IKEA co-workers in product design and
in tough conditions or subjected to harsh product development focus on price and
conditions. quality, design and function, environment and
health. They scrutinise every product idea with
Concurrent Engineering is the collaboration of regard to the best use of raw materials and
design, production and purchasing staff in the manufacturing opportunities,”
development of a new product to ensure its
viability. Summary

Computer-Aided Design is the use of a A business can effectively compete in the

computer-software to draw and view a new marketplace with a good product and service
product. design. A new design for a product can be
proposed by the company’s owner, employee,
Quality Function Deployment is an approach customer and supplier. It can even be inspired
wherein customers’ suggestions are factored-in by a competitor’s product. The important
in the design of the product. concepts in product and service design are: (1)
reverse engineering, (2) standardization, (3)
Remanufacturing is the reconditioning of a robust design, concurrent engineering, (4)
used product by replacing its worn-out parts computer-aided design, (5) quality function
with new ones. deployment, (6) remanufacturing, and (7)
customer contact. A product’s design may also
Customer Contact means that the service evolve as it goes through its lifecycle.
provider will directly interact with the customer
in the process of giving the service. The Quality Function Deployment
service design should be based on the service
strategy of the company. A Quality Function Deployment is an approach
that integrates the “voice of the customer” into
Product Life Cycle and Product Design both product and service development. The
purpose is to ensure that customer
“Many new products and services go through a requirements are factored into every aspect of
life cycle in terms of demand. When an item is the process. Listening to and understanding
introduced, it may be treated as a curiosity. the customer is the central feature of QFD.
Demand is generally low because potential Lastly, it is considered a quality tool used in
buyers are not yet familiar with the item. Many quality management.
potential buyers recognize that all of the bugs
have probably not been worked out and that Basic QFD (refer to the image below)
the price may drop after the introductory
period. Production methods are designed for
low volume. With the passage of time, design
improvements usually create a more reliable
and less costly product. Demand then grows
for these reasons and because of increasing
awareness of the product or service. Higher
production volume will involve different
methods and contribute lower costs. At the
next stage in the life cycle, the product or
service reaches maturity: there are few, if any,
design changes, and demand levels off.
Eventually, the market becomes saturated,
which leads to a decline in demand. In the last
stage of a life cycle, some firms adopt a
defensive research posture whereby they
attempt to prolong the useful life of a product or
service by improving its reliability, reducing
costs of producing it, redesigning it, or
changing the packaging,” (Stevenson, 2017).

Case: Ikea’s Design and Product

Development

“The design of home furnishings products at

IKEA starts with an understanding of people’s
everyday needs at home, especially the needs
The more elaborate and comprehensive QFD and their degree of importance are shown in
(otherwise known as House of Quality) the center of the figure. The circle with a dot
inside indicates the strongest positive
relationship; that is, it denotes the most
important technical requirements for satisfying
customer requirements. Now look at the
“importance to customer” numbers that are
shown next to each customer requirement (3 is
the most important). Designers will take into
account the importance values and the
strength of correlation in determining where to
focus the greatest effort.

Next, consider the correlation matrix at the

top of the “house.” Of special interest is the
strong negative correlation between “paper
thickness” and “roll roundness.” Designers will
have to find some way to overcome that or
make a trade-off decision.

On the right side of the figure is a competitive

evaluation comparing the supplier's
The structure of QFD is based on a set of performance on the customer requirements
matrices. Quality Function Deployment with each of the two key competitors (A and B).
encompasses the following matrices: For example, the supplier (X) is worst on the
first customer requirement and best on the third
1. Customer requirements (wants) customer requirement. The line connects the X
Technical Requirements (how) performances. Ideally, design will cause all of
2. Competitive Assessment (Competitive the Xs to be in the highest positions.
evaluation/technical benchmark)
3. Design Requirement (Product Across the bottom of the figure are importance
characteristics) weightings, target values, and technical
4. Relationship matrix` evaluations. The technical evaluations can be
5. Specifications (Trade-off matrix) Adding interpreted in a manner similar to that of the
trade-offs, targets & developing product competitive evaluations (note the line
specifications connecting the Xs). The target values typically
6. Target Values (Setting Targets) contain technical specifications, which we will
not discuss. The importance weightings are the
An example QFD used in determining sums of values assigned to the relationships
consumer wants in a Printer (refer to the image (see the lower right-hand key for relationship
below) weights). The 3 in the first column is the
product of the importance to the customer, 3,
and the small (Δ) weight, 1. The importance
weightings and target evaluations help
designers focus on desired results. In this
example, the first technical requirement has the
lowest importance weighting, while the next
four technical requirements all have relatively
high importance weightings.

QFD – The house of quality sequence

An analysis using this format is shown in the

figure above. The data relate to a commercial The house of quality approach involves a
printer (customer) and the company that sequence of “houses,” beginning with design
supplies the paper. At first glance, the display characteristics, which leads to specific
appears complex. It contains a considerable components, then production processes, and
amount of information for product and process finally, a quality plan. The sequence is
planning. Therefore, let's break it up into illustrated in the figure above. Although the
separate parts and consider them one at a details of each house are beyond the scope,
time. To start, a key part is the list of customer This house of quality sequence provides a
requirements on the left side of the figure. conceptual understanding of the progression
Next, note the technical requirements, listed involved.
vertically near the top. The key relationships