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INDUSTRIAL
MANAGEMENT
Topic 1:
BASIC CONCEPTS IN
OPERATION MANAGEMENT
UiTM Shah Alam
Lecturer: Pn. Ahsana Aqilah Ahmad
T1-A14-2C
At the end of this lesson students should be able
to :
1. Discuss the nature of production/operations
management
2. Recognize the functions of production/operations
manager
3. Compare and contrast the differences between goods
and services operations management
4. Identify the current trends and issues in
production/operations management
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Learning outcomes
Operations Management (1)
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Operations Management is:
The management of systems or processes
that create goods and/or provide services

Operations Management affects:
Companies ability to compete
Nations ability to compete internationally
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Operations Management (2)
Production is the creation of goods
and services
Operations management is the set
of activities that creates value in the
form of goods and services by
transforming inputs into outputs
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Why Study OM?
1. OM is one of three major functions
(marketing, finance, and operations) of any
organization
2. We want (and need) to know how goods and
services are produced
3. We want to understand what operations
managers do
4. OM is such a costly part of an organization
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The Organization
The Three Basic Functions
Organization
Finance Operations Marketing
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Organization
Essential functions:
Marketing generates demand
Production/operations creates the
product
Finance/accounting tracks how well the
organization is doing, pays bills, collects
the money
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Example of Organizational Charts
Operations
Teller
Scheduling
Check Clearing
Collection
Transaction
processing
Facilities
design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust Department
Commercial Bank
Figure 1.1(A)
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Example of Organizational Charts
Operations
Ground support
equipment
Maintenance
Ground Operations
Facility
maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange
Airline
Figure 1.1(B)
Marketing
Traffic
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
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Marketing
Sales
promotion
Advertising
Sales
Market
research
Example of Organizational Charts
Operations
Facilities
Construction; maintenance
Production and inventory control
Scheduling; materials control
Quality assurance and control
Supply chain management
Manufacturing
Tooling; fabrication; assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space,
and personnel
Process analysis
Development and installation of
production tools and equipment
Finance/
accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Manufacturing
Figure 1.1(C)
Value-Added Process
The operations function involves the conversion of
inputs into outputs
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Control
Feedback
Feedback Feedback
Value added
Figure 1.2
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Value-Added and Product Packages
1. Value-added elements make the
difference between the cost of inputs and
the value or price of outputs.
2. Product packages are a combination of
goods and services.
3. Product packages can make a company
more competitive.
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Automobile assembly, steel making
Home remodeling, retail sales
Automobile repair, fast food
The GoodsService Continuum
Figure 1.3
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
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Food Processor
Inputs Processing Outputs
Raw vegetables Cleaning Canned
vegetables
Metal sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
Table 1.2
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Hospital
Inputs Processing Outputs
Doctors, nurses Examination Treated
patients
Hospital Surgery
Medical supplies Monitoring
Equipment Medication
Laboratories Therapy
Table 1.2
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Manufacturing or Service?
Tangible
Act
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Production of Goods
vs. Delivery of Services
1. Production of goods tangible output
2. Delivery of services an act
3. Service job categories
Government
Wholesale/retail
Financial services
Healthcare
Personal services
Business services
Education
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Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content (predictable) Low High
Uniformity of output High Low
Output; production & delivery Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems;Quality
Assurance
High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usually
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Key Differences:
Goods vs. Service
Table 1.3
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Operations Management includes:
1. Forecasting
2. Capacity planning
3. Scheduling
4. Managing inventories
5. Assuring quality
6. Motivating and training employees
7. Locating facilities
8. Supply chain management
9. And more . . .
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Types of Operations
Table 1.4
Operations Examples
Goods Producing Farming, mining, construction ,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, financial
advising, renting or leasing
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and TV
newscasts, telephone, satellites
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What Operations
Managers Do
Planning
Organizing
Staffing
Leading
Controlling
Basic Management Functions
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Ten Critical Decisions
Ten Decision Areas Chapter(s)
1. Design of goods and services 5
2. Managing quality 6, Supplement 6
3. Process and capacity 7, Supplement 7
design
4. Location strategy 8
5. Layout strategy 9
6. Human resources and 10, Supplement 10
job design
7. Supply chain 11, Supplement 11
management
8. Inventory management 12, 14, 16
9. Scheduling 13, 15
10. Maintenance 17
Table 1.2
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The Critical Decisions
1. Design of goods and services
What good or service should we offer?
How should we design these products
and services?
2. Managing quality
How do we define quality?
Who is responsible for quality?

Table 1.2 (cont.)
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The Critical Decisions
3. Process and capacity design
What process and what capacity will
these products require?
What equipment and technology is
necessary for these processes?
4. Location strategy
Where should we put the facility?
On what criteria should we base the
location decision?
Table 1.2 (cont.)
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The Critical Decisions
5. Layout strategy
How should we arrange the facility?
How large must the facility be to meet
our plan?
6. Human resources and job design
How do we provide a reasonable work
environment?
How much can we expect our employees
to produce?
Table 1.2 (cont.)
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The Critical Decisions
7. Supply chain management
Should we make or buy this component?
Who are our suppliers and who can
integrate into our e-commerce program?
8. Inventory, material requirements
planning, and JIT
How much inventory of each item should
we have?
When do we re-order?
Table 1.2 (cont.)
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The Critical Decisions
9. Intermediate and shortterm
scheduling
Are we better off keeping people on the
payroll during slowdowns?
Which jobs do we perform next?
10.Maintenance
Who is responsible for maintenance?
When do we do maintenance?
Table 1.2 (cont.)
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Where are the OM Jobs?
Figure 1.2
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Ethical Issues
1. Financial statements
2. Worker safety
3. Product safety
4. Quality
5. Environment
6. Community
7. Hiring/firing workers
8. Closing facilities
9. Workers rights
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Trends in Business
Major trends
1. The Internet, e-commerce, e-business
2. Management technology
3. Globalization
4. Management of supply chains
5. Outsourcing
6. Agility
7. Ethical behavior
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Other Important Trends
1. Operations strategy
2. Working with fewer resources
3. Revenue management
4. Process analysis and improvement
5. Increased regulation and product liability
6. Lean production

10/15/2014
NY_MEM 575: Courtesy of Mc Graw Hills
& Pearson-Prentice Hall
At the end of this lesson students should be able
to :
1. Discuss the nature of production/operations
management
2. Recognize the functions of production/operations
manager
3. Compare and contrast the differences between goods
and services operations management
4. Identify the current trends and issues in
production/operations management
10/15/2014 NY_MEM 575: Courtesy of Mc Graw Hills &
Pearson-Prentice Hall
32
Learning outcomes
33
Lets Recap
1. What is the nature of production/operation
management
2. What are the functions of production/operations
manager; identify and discuss.
3. What are the differences between goods and
services operations management; compare and
contrast
4. What are the current trends and issues in
production/operations management; identify

10/15/2014
NY_MEM 575: Courtesy of Mc Graw Hills
& Pearson-Prentice Hall