W. J. S. 2025 – 2026
Operational Management
1. INTRODUCTION OPERATIONAL MANAGEMENT
Operations and managing
1. Managing operations
➢ OPERATIONS = transport INPUTS into OUTPUTS
o INPUTS = capital, materials, human resources (skills and knowledge),
technology, equipment and facilities, …
o OUTPUTS = products (physical output of a process) or services (intangible
output of a process)
▪ We need those inputs to get our outputs!!
➢ MANAGING = process of “decision making” for all factors influencing operations
(responsibilities)
o Design, planning, implementation and control, improvement, protection
➢ Example
o System: hospital
o Inputs: patients
o Resources: nurses, medical supplies, equipment, …
o Primary transformation: health care (psychological, well-prepared, well-served
food, agreeable environments
o Output: healthy individuals
What operations management is in view of an organization’s objective
➢ Creation and distribution of goods and services at the right place, at the right time, in
the right quantity
2. Operations management responsibilities
DESIGN, PLANNING, IMPLEMENTATION AND CONTROL, IMPROVEMENT, AND PROTECTION
DESIGN
➢ Product design (e.g., improving an existing product)
➢ Production layout design
➢ Process technology (e.g., a different or new workspace for the new product)
➢ Job design (tools, equipment)
➢ Location theory, required capacity, bottlenecks
1
,W. J. S. 2025 – 2026
PLANNING
➢ PRODUCTION OPERATING SYSTEMS (planning systems, product/service and process)
o AGGREGATE vs DETAILED
o MATERIAL-ORIENTED (material requirements/resource planning (MPR),
enterprise resource planning (ERP), just-in-time (JIT, … vs CAPACITY-ORIENTED
(theory-of-constraints (TOC), load-oriented planning (LOP), …
o Scheduling & sequencing (short term)
o Project planning (critical path method (CPM), resource allocations, …
➢ SUPPLY CHAIN
o Purchasing policy and production planning and distribution planning
o CENTRAL vs DECENTRAL decision making
o BULLWHIP
IMPLEMENTATION AND CONTROL
➢ QUALITY CONTROL AND TOTAL QUALITY MANAGEMENT (TQM)
o Non-cost of quality vs cost of non-quality
o Quality circles, Ishikawa (fishbone diagram), Kaizen, …
➢ MAINTENANCE
o Preventive vs corrective (e.g., broken down machine, fix it or prevent, …)
➢ INFORMATION HANDLING
o Communication networks, management information system (MIS), business
analytics, ….
➢ PERFORMANCE EVALUATION (financial or operational)
o First pass yield, cycle time, due date performance, …
➢ COST CALCULATION
o Activity based costing (ABC), time-driven ABC, …
IMPROVEMENT
➢ CONTROL REVEALS OPPORTUNITIES FOR IMPROVEMENT
➢ CONTINUOUS IMPROVEMENT
PROTECTION
➢ WHY
o Uncertainty, variability, failures, …
➢ HOW
o INVENTORY
2
,W. J. S. 2025 – 2026
▪ Types: disconnected inventory, pipeline inventory, safety inventory,
anticipation inventory, inventory due to batching, inventory due to
capacity limitations, …
▪ Level: raw material, WIP (work-in—progress), standard modules, end
items, …
➢ Safety time
➢ Additional capacity
3. Operations management levels
1. Research-based
2. Hierarchy-based
RESEARCH-BASED
➢ Management/strategic
o EFFECTIVITY
➢ Technical/analytical
o EFFICIENCY
➢ Tools or decision-making
o QUALITATIVE ~ soft Operations research and Management Science (OR/MS)
▪ Survey
▪ Case study
▪ Action research
o QUANTITATIVE ~ hard OR/MS
▪ Optimisation (linear, integer, non-linear)
▪ Network models
▪ Decision making (under uncertainty, with multiple objectives)
▪ Game theory
▪ Inventory models (deterministic, probabilistic)
▪ Markov chains
▪ Dynamic programming (deterministic, probabilistic)
▪ Queueing theory
▪ Simulation
▪ Forecasting models
HIERARCHY-BASED
➢ STRATEGIC (long-term)
o How to make the product?
o Where to locate facilities?
➢ TACTICAL (intermediate term)
o How many workers?
o How much finished good (end item) inventory?
➢ OPERATIONAL (short-term)
3
, W. J. S. 2025 – 2026
o Which jobs to work on today?
o What are the priority jobs?
4. Operations management competitive dimensions
➢ Given a choice of customers, how do they decide which product or service to buy?
1. TIME (quick)
2. COST (inexpensive)
3. QUALITY (accurate)
4. FLEXIBLE
➢ Translate competitive dimensions into performance requirements for operations
➢ Operations cannot excel simultaneously on all competitive dimensions: trade-off
TIME
➢ Make it fast
➢ On-time delivery, deliver it when promised (+ coping with changes in demand)
o High service level
▪ Effectivity
o Cooperation with and integration of supply chain partners, …
➢ Time-to-market (product change)
o Flexibility, agility
COST
➢ Make it cheap
➢ Competitive market prices
o Being efficient
➢ Controlling and lowering costs
o Focus on efficiency in all operations
o Elimination of waste (broad sense)
o Improvement of yield (automation)
QUALITY
➢ Make a correct, reliable product, customized to the customer’s needs
➢ Product quality
o Focus on customer requirements
➢ Process quality
o Produce error-free products
➢ After-sale support
FLEXIBILITY
➢ Company environment changes rapidly
➢ Company must accommodate change by being flexible
o PRODUCT FLEXIBILITY
4
Operational Management
1. INTRODUCTION OPERATIONAL MANAGEMENT
Operations and managing
1. Managing operations
➢ OPERATIONS = transport INPUTS into OUTPUTS
o INPUTS = capital, materials, human resources (skills and knowledge),
technology, equipment and facilities, …
o OUTPUTS = products (physical output of a process) or services (intangible
output of a process)
▪ We need those inputs to get our outputs!!
➢ MANAGING = process of “decision making” for all factors influencing operations
(responsibilities)
o Design, planning, implementation and control, improvement, protection
➢ Example
o System: hospital
o Inputs: patients
o Resources: nurses, medical supplies, equipment, …
o Primary transformation: health care (psychological, well-prepared, well-served
food, agreeable environments
o Output: healthy individuals
What operations management is in view of an organization’s objective
➢ Creation and distribution of goods and services at the right place, at the right time, in
the right quantity
2. Operations management responsibilities
DESIGN, PLANNING, IMPLEMENTATION AND CONTROL, IMPROVEMENT, AND PROTECTION
DESIGN
➢ Product design (e.g., improving an existing product)
➢ Production layout design
➢ Process technology (e.g., a different or new workspace for the new product)
➢ Job design (tools, equipment)
➢ Location theory, required capacity, bottlenecks
1
,W. J. S. 2025 – 2026
PLANNING
➢ PRODUCTION OPERATING SYSTEMS (planning systems, product/service and process)
o AGGREGATE vs DETAILED
o MATERIAL-ORIENTED (material requirements/resource planning (MPR),
enterprise resource planning (ERP), just-in-time (JIT, … vs CAPACITY-ORIENTED
(theory-of-constraints (TOC), load-oriented planning (LOP), …
o Scheduling & sequencing (short term)
o Project planning (critical path method (CPM), resource allocations, …
➢ SUPPLY CHAIN
o Purchasing policy and production planning and distribution planning
o CENTRAL vs DECENTRAL decision making
o BULLWHIP
IMPLEMENTATION AND CONTROL
➢ QUALITY CONTROL AND TOTAL QUALITY MANAGEMENT (TQM)
o Non-cost of quality vs cost of non-quality
o Quality circles, Ishikawa (fishbone diagram), Kaizen, …
➢ MAINTENANCE
o Preventive vs corrective (e.g., broken down machine, fix it or prevent, …)
➢ INFORMATION HANDLING
o Communication networks, management information system (MIS), business
analytics, ….
➢ PERFORMANCE EVALUATION (financial or operational)
o First pass yield, cycle time, due date performance, …
➢ COST CALCULATION
o Activity based costing (ABC), time-driven ABC, …
IMPROVEMENT
➢ CONTROL REVEALS OPPORTUNITIES FOR IMPROVEMENT
➢ CONTINUOUS IMPROVEMENT
PROTECTION
➢ WHY
o Uncertainty, variability, failures, …
➢ HOW
o INVENTORY
2
,W. J. S. 2025 – 2026
▪ Types: disconnected inventory, pipeline inventory, safety inventory,
anticipation inventory, inventory due to batching, inventory due to
capacity limitations, …
▪ Level: raw material, WIP (work-in—progress), standard modules, end
items, …
➢ Safety time
➢ Additional capacity
3. Operations management levels
1. Research-based
2. Hierarchy-based
RESEARCH-BASED
➢ Management/strategic
o EFFECTIVITY
➢ Technical/analytical
o EFFICIENCY
➢ Tools or decision-making
o QUALITATIVE ~ soft Operations research and Management Science (OR/MS)
▪ Survey
▪ Case study
▪ Action research
o QUANTITATIVE ~ hard OR/MS
▪ Optimisation (linear, integer, non-linear)
▪ Network models
▪ Decision making (under uncertainty, with multiple objectives)
▪ Game theory
▪ Inventory models (deterministic, probabilistic)
▪ Markov chains
▪ Dynamic programming (deterministic, probabilistic)
▪ Queueing theory
▪ Simulation
▪ Forecasting models
HIERARCHY-BASED
➢ STRATEGIC (long-term)
o How to make the product?
o Where to locate facilities?
➢ TACTICAL (intermediate term)
o How many workers?
o How much finished good (end item) inventory?
➢ OPERATIONAL (short-term)
3
, W. J. S. 2025 – 2026
o Which jobs to work on today?
o What are the priority jobs?
4. Operations management competitive dimensions
➢ Given a choice of customers, how do they decide which product or service to buy?
1. TIME (quick)
2. COST (inexpensive)
3. QUALITY (accurate)
4. FLEXIBLE
➢ Translate competitive dimensions into performance requirements for operations
➢ Operations cannot excel simultaneously on all competitive dimensions: trade-off
TIME
➢ Make it fast
➢ On-time delivery, deliver it when promised (+ coping with changes in demand)
o High service level
▪ Effectivity
o Cooperation with and integration of supply chain partners, …
➢ Time-to-market (product change)
o Flexibility, agility
COST
➢ Make it cheap
➢ Competitive market prices
o Being efficient
➢ Controlling and lowering costs
o Focus on efficiency in all operations
o Elimination of waste (broad sense)
o Improvement of yield (automation)
QUALITY
➢ Make a correct, reliable product, customized to the customer’s needs
➢ Product quality
o Focus on customer requirements
➢ Process quality
o Produce error-free products
➢ After-sale support
FLEXIBILITY
➢ Company environment changes rapidly
➢ Company must accommodate change by being flexible
o PRODUCT FLEXIBILITY
4
