Operations Management: Key Concepts and
Strategies for Students
Define Operations Management
Operations Management (OM) focuses on managing the transformation process that
converts inputs (labor, materials, capital, information) into outputs (goods/services)
efficiently and effectively to meet customer needs.
Role of Operations Management
Fulfill customer wants and needs
Manage efficiency and productivity (Output/Input)
Control cost, quality, delivery, flexibility, and sustainability
Cross-Functional Decision Making
Operations works with:
Marketing (creates demand)
Finance (funds operations)
R&D/Engineering (designs products) Decisions must align across departments.
Transformation Processes
Inputs → Transformation → Outputs Examples: Hospital → doctors + equipment →
healthy patients Manufacturing plant → labor + raw materials → finished goods
Operations Strategy
A consistent pattern of operations decisions that supports business strategy and creates
competitive advantage.
Levels of Decision Making
Strategic (long-term, top management), Tactical (mid-term planning),
Operational (daily decisions).
Operations Strategy Process
Define mission
Identify operations objectives
Make strategic decisions (process, capacity, etc.)
Align with business strategy
Mission Statements
Define the company's purpose and direction (e.g., Starbucks - inspire and nurture the
human spirit).
Operations Objectives
Cost – resources used by operations.
Quality – conformance to customer expectations.
Delivery – quickly and on time.
Flexibility – ability to rapidly change operations.
Sustainability – environmental, social, economic.
Strategic Decisions (5 Major Areas)
Process
Quality
,Capacity
Inventory
Supply Chain
Distinctive Competence
An operational capability that a company does better than competitors and adds
customer value (e.g., patents, innovation).
Business strategy alternatives.
Low cost:
• Operations produces standard product or service.
Differentiation:
• Operations need flexibility in processes, labor, and suppliers.
Customer perspective
Order qualifier:
• The objective must be delivered at an acceptable level for the customer to
consider product/service - can be an order loser if not met.
Order winner:
• Objective causes the customer to choose the product/service.
Product Design
Operations must ensure product can actually be produced efficiently and at quality
standards.
New Product Introduction Strategies
Market Pull: “Make what we can sell."
• Organize resources to fulfill customer demand.
• Food industry (convert Italian restaurant to Mexican restaurant).
Technology Push: “Sell what we can make."
• Develop superior technologies and products.
• Electronics.
Interfunctional view: most challenging.
• Cross-functional design team – marketing, engineering,
New Product Development (NPD) Process
Concept Development:
• Idea generation and evaluation of alternative ideas.
Product Design:
• Design of the physical new product (consider tradeoffs).
• Design of the production process (resources, tasks, training).
Pilot Production/Testing:
• Testing production prototypes (example, 3D printing).
• Finalizing the production process.
• Finalizing an ‘information package’ specifying product and process design details.
Cross-Functional Product Design
Sequential ("over the wall")
Concurrent Engineering (team-based, simultaneous work)
Quality Function Deployment (QFD)
Tool linking:
Voice of Customer
, Engineering Specifications
Helps identify trade-offs
Relationship Matrix
Part of QFD showing the relationship between customer requirements and engineering
characteristics.
Modular Design
Products are designed in interchangeable modules for flexibility and customization.
-mixing and matching
-ex: IKEA
Product Flow Characteristics
Continuous Process, Assembly Line, Batch Flow, Job Shop, Project.
Continuous process
• Highly standardized • Flexibility • High volumes production.
• Commodity products.
• Low cost is the 'Orde Winner'.
• Process industries: sugar, paper, oil, electricity
Assembly line.
• Linear sequence of operations (often paced).
• Large capital investment, use of automation.
• Very efficient.
• High-volume, standardized products.
• Low flexibility to product and volume changes.
• Discrete products: autos, appliances, computers.
Batch flow.
• Production of batches or lots.
• Batches flow as a unit (set) from one work center to another.
• The process layout of work centers, machines, and labor is organized by task.
• Flow is jumbled and intermittent.
• Can make many different types of products, so more variety than an assembly line.
• Used when the volume is not high, and there are many different products.
• Many types of products: furniture, dishes, boats.
Job shop.
• Customized to customer order.
• Production of small batches or lots.
• Layout/flow similar to batch flow.
• Flexible labor and general-purpose equipment.
• Costs are higher since volume and standardization are low
• Automation and robots have been introduced to reduce labor costs
• Many types of made-to-order products: plastic parts, machine components, custom
signs, artificial limbs.
Project.
• Production of customized single products, unique or creative products.
• Labor and materials brought to site.
• Planning, scheduling challenges (product may not have been made before).
• Little automation, general purpose equipment.
• Highly skilled and flexible labor.
Strategies for Students
Define Operations Management
Operations Management (OM) focuses on managing the transformation process that
converts inputs (labor, materials, capital, information) into outputs (goods/services)
efficiently and effectively to meet customer needs.
Role of Operations Management
Fulfill customer wants and needs
Manage efficiency and productivity (Output/Input)
Control cost, quality, delivery, flexibility, and sustainability
Cross-Functional Decision Making
Operations works with:
Marketing (creates demand)
Finance (funds operations)
R&D/Engineering (designs products) Decisions must align across departments.
Transformation Processes
Inputs → Transformation → Outputs Examples: Hospital → doctors + equipment →
healthy patients Manufacturing plant → labor + raw materials → finished goods
Operations Strategy
A consistent pattern of operations decisions that supports business strategy and creates
competitive advantage.
Levels of Decision Making
Strategic (long-term, top management), Tactical (mid-term planning),
Operational (daily decisions).
Operations Strategy Process
Define mission
Identify operations objectives
Make strategic decisions (process, capacity, etc.)
Align with business strategy
Mission Statements
Define the company's purpose and direction (e.g., Starbucks - inspire and nurture the
human spirit).
Operations Objectives
Cost – resources used by operations.
Quality – conformance to customer expectations.
Delivery – quickly and on time.
Flexibility – ability to rapidly change operations.
Sustainability – environmental, social, economic.
Strategic Decisions (5 Major Areas)
Process
Quality
,Capacity
Inventory
Supply Chain
Distinctive Competence
An operational capability that a company does better than competitors and adds
customer value (e.g., patents, innovation).
Business strategy alternatives.
Low cost:
• Operations produces standard product or service.
Differentiation:
• Operations need flexibility in processes, labor, and suppliers.
Customer perspective
Order qualifier:
• The objective must be delivered at an acceptable level for the customer to
consider product/service - can be an order loser if not met.
Order winner:
• Objective causes the customer to choose the product/service.
Product Design
Operations must ensure product can actually be produced efficiently and at quality
standards.
New Product Introduction Strategies
Market Pull: “Make what we can sell."
• Organize resources to fulfill customer demand.
• Food industry (convert Italian restaurant to Mexican restaurant).
Technology Push: “Sell what we can make."
• Develop superior technologies and products.
• Electronics.
Interfunctional view: most challenging.
• Cross-functional design team – marketing, engineering,
New Product Development (NPD) Process
Concept Development:
• Idea generation and evaluation of alternative ideas.
Product Design:
• Design of the physical new product (consider tradeoffs).
• Design of the production process (resources, tasks, training).
Pilot Production/Testing:
• Testing production prototypes (example, 3D printing).
• Finalizing the production process.
• Finalizing an ‘information package’ specifying product and process design details.
Cross-Functional Product Design
Sequential ("over the wall")
Concurrent Engineering (team-based, simultaneous work)
Quality Function Deployment (QFD)
Tool linking:
Voice of Customer
, Engineering Specifications
Helps identify trade-offs
Relationship Matrix
Part of QFD showing the relationship between customer requirements and engineering
characteristics.
Modular Design
Products are designed in interchangeable modules for flexibility and customization.
-mixing and matching
-ex: IKEA
Product Flow Characteristics
Continuous Process, Assembly Line, Batch Flow, Job Shop, Project.
Continuous process
• Highly standardized • Flexibility • High volumes production.
• Commodity products.
• Low cost is the 'Orde Winner'.
• Process industries: sugar, paper, oil, electricity
Assembly line.
• Linear sequence of operations (often paced).
• Large capital investment, use of automation.
• Very efficient.
• High-volume, standardized products.
• Low flexibility to product and volume changes.
• Discrete products: autos, appliances, computers.
Batch flow.
• Production of batches or lots.
• Batches flow as a unit (set) from one work center to another.
• The process layout of work centers, machines, and labor is organized by task.
• Flow is jumbled and intermittent.
• Can make many different types of products, so more variety than an assembly line.
• Used when the volume is not high, and there are many different products.
• Many types of products: furniture, dishes, boats.
Job shop.
• Customized to customer order.
• Production of small batches or lots.
• Layout/flow similar to batch flow.
• Flexible labor and general-purpose equipment.
• Costs are higher since volume and standardization are low
• Automation and robots have been introduced to reduce labor costs
• Many types of made-to-order products: plastic parts, machine components, custom
signs, artificial limbs.
Project.
• Production of customized single products, unique or creative products.
• Labor and materials brought to site.
• Planning, scheduling challenges (product may not have been made before).
• Little automation, general purpose equipment.
• Highly skilled and flexible labor.
