Operations Management with TQM

(Week 2 Discussion)
OPERATIONS AND PRODUCTIVITY
• What is operations? -The part of a business organization that is responsible for producing goods or services.
• How can we define operations management? -The management of systems or processes that create goods
and/or provide services.
• Scope of Operations Management
The scope of operations management ranges across the organization.
The operations function includes many interrelated activities such as:

➢ Forecasting
➢ Capacity planning
➢ Scheduling
➢ Managing inventories
➢ Assuring quality
➢ Motivating employees
➢ Deciding where to locate facilities

• Basic Functions of the Business Organization

 Marketing refers to activities a company undertakes to promote the buying or selling of a product or
service. Marketing includes advertising, selling, and delivering products to consumers or other
businesses. Some marketing is done by affiliates on behalf of a company. (Source: Investopedia.com)
 Financial Management means planning, organizing, directing and controlling the financial activities
such as procurement and utilization of funds of the enterprise. It means applying general management
principles to financial resources of the enterprise. (Source: Managementstudyguide.com)
Manufacturing vs. Service
• Manufacturing is characterized by tangible outputs (products). Consumption of outputs at overtime. Jobs
useless labor and more equipment, little customer contact, no customer participation in the conversion
process (in production). Sophisticated methods for measuring production activities and resource
consumption as product are made.
• Service is characterized by intangible outputs. In addition, it possesses a potential for high variability in
quality of output. Production and consumption occur simultaneously. Jobs use more labor and less
equipment, direct consumer contact, frequent customer participation in the conversion process.
Elementary methods for measuring conversion activities and resource consumption are used.

Manufacturing and service are two distinct sectors of the economy that involve different
types of activities, processes, and outputs. Here's an overview of the differences between
manufacturing and service:

Manufacturing: Manufacturing refers to the process of creating tangible products by

transforming raw materials, components, or parts into finished goods through various
production processes. This sector involves activities such as designing, producing,
assembling, and packaging physical products. Examples of manufacturing industries include
automotive, electronics, textiles, food and beverage, and pharmaceuticals. Key
characteristics of manufacturing include:

1. Tangibility: Manufacturing deals with physical products that can be touched, seen,
and held.
2. Production Focus: The main focus is on producing goods efficiently and in large
quantities.
3. Supply Chain: Manufacturing often involves complex supply chains with various
stages, including sourcing raw materials, production, distribution, and retail.
4. Quality Control: Quality is crucial in manufacturing to ensure that products meet
predetermined standards.
5. Capital-Intensive: Manufacturing often requires substantial investments in
machinery, equipment, and facilities.

Service: Services involve intangible activities or actions provided by individuals or

organizations to fulfill specific needs or desires of consumers. Unlike manufacturing,
services do not result in the creation of tangible goods. Instead, they encompass a wide
range of activities, such as healthcare, education, banking, consulting, entertainment, and
hospitality. Key characteristics of services include:

1. Intangibility: Services are intangible and cannot be held or touched. They are
experienced through interactions and actions.
2. Customer-Centric: Services are often personalized and customized to meet the
unique needs of individual customers.
3. Labor-Intensive: Services rely heavily on human resources, skills, and expertise.
4. Direct Interaction: Services usually involve direct interactions between service
providers and consumers.
5. Quality of Experience: The quality of service is measured by customer
satisfaction, experience, and the value delivered.

Interactions and Overlaps: It's important to note that there can be interactions and
overlaps between manufacturing and service. For instance, manufacturing companies often
provide after-sales services such as maintenance, repairs, and customer support. Service
providers might require physical products or equipment to deliver their services effectively.

In today's economy, there is a growing emphasis on offering value through a combination

of both tangible products and high-quality services. This integrated approach is sometimes
referred to as "servitization," where manufacturers incorporate services into their offerings
to enhance customer experience and create a competitive advantage.

Ultimately, both manufacturing and service sectors play vital roles in economic
development and contribute to the overall well-being of societies.

• Manufacturing and Service Organizations differ chiefly because manufacturing is goods oriented, and
service is act oriented.
 The following characteristics can be considered for distinguishing Manufacturing Operations with Service
Operations:
1. Tangible/Intangible nature of output
2. Production and consumption
3. Nature of work (job)
4. Degree of customer contact
5. Customer participation in conversion
6. Measurement of performance
7. Quality of output
8. Inventory accumulated.
Concept of Production
 Production function is ‘the part of an organization, which is concerned with the transformation
of a range of inputs into the required outputs (products) having the requisite quality level’.
 Production is defined as ‘the step-by-step conversion of one form of material into another form
through chemical or mechanical process to create or enhance the utility of the product to the
user’. Thus, production is a value addition process. At each stage of processing, there will be
value addition.
 Edwood Buffa defines production as ‘a process by which goods and services are created’. Some
examples of production are: manufacturing custom-made products like, boilers with a specific
capacity, constructing flats, some structural fabrication works for selected customers, etc., and
manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.
Production System
The production system is ‘that part of an organization, which produces products of an organization. It
is that activity whereby resources, flowing within a defined system, are combined, and transformed in
a controlled manner to add value in accordance with the policies communicated by management’.

A production system is a structured arrangement of resources, processes, and activities

designed to transform inputs into desired outputs, whether those outputs are goods or
services. It encompasses the methods, tools, technologies, and strategies used to efficiently
and effectively produce products or deliver services. The design and management of a
production system are crucial for achieving high-quality outputs, optimizing resource
utilization, and meeting customer demands.

Components and Elements of a Production System:

1. Inputs: These are the resources required for the production process. Inputs can
include raw materials, components, labor, energy, information, and capital.
2. Transformation Process: This is the core activity of the production system where
inputs are processed, combined, or transformed to create the desired outputs. The
transformation process can involve various stages, such as design, manufacturing,
assembly, testing, and packaging.
3. Outputs: These are the final products or services generated by the production
system. Outputs can be physical goods or intangible services that meet customer
needs and expectations.
4. Quality Control: Ensuring the quality of outputs is a critical component of a
production system. Quality control methods and procedures are implemented to
monitor and maintain consistent product or service quality.

The production system has the following characteristics:

1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists feedback about the activities, which is essential to control and improve system
performance.
 Operations Management with TQM
(Week 3 Discussion)
THE GLOBAL ENVIRONMENT AND OPERATIONS STRATEGY
Competitiveness:
How effectively an organization meets the wants and needs of customers relative to others that offer similar
goods or services.
– Organizations compete through some combination of their marketing and operations functions
• What do customers want?
• How can these customer needs best be satisfied?

Being competitive in the business world through operations management involves optimizing
various aspects of your business operations to achieve efficiency, cost-effectiveness, quality, and
customer satisfaction. Remember that operations management is an ongoing process.
Continuously monitor, evaluate, and adapt your strategies to keep pace with changing market
dynamics and customer expectations. By focusing on operational excellence, you can position
your company as a competitive force in your industry.

examples of companies that are known for their competitiveness and effective
operations management strategies:

1. Coca-Cola: Coca-Cola's efficient production and distribution network allow

its products to reach consumers across the globe quickly. The company's
strong brand and efficient bottling operations contribute to its competitive
position. (coke zero, different sizes- sakto, mismo, 1.5, 500 ml, 1 lit)
2. Apple: Apple is renowned for its supply chain management, which enables it to introduce
new products quickly and efficiently. The company's design, manufacturing, and distribution
processes are closely integrated, allowing for rapid innovation and global product launches.
(every year, produces a new model of phone – also has some aspects like tablet called as
ipad, laptop known as macbook, earbuds, phone called as iphone)
3. Samsung: Samsung's operations management is a key factor in its success across various
industries. The company's diversified portfolio, innovation-driven culture, and efficient
manufacturing processes contribute to its competitiveness. ( just the same as apple- models
like s23 for year 2023, every year has an improvement)

These companies showcase a range of strategies and approaches to operations

management that contribute to their competitiveness in their respective
industries. It's important to note that each company's success is influenced by a
combination of factors, including innovation, customer focus, employee
engagement, and adaptability to changing market dynamics.

Marketing’s Influence
• Identifying consumer wants and/or needs
• Pricing
• Advertising and promotion
Businesses Compete Using Operations

1. Product and Service Design: The design of products and services impacts their
attractiveness, functionality, and ability to meet customer needs. Businesses that can
innovate and create products/services that stand out in terms of features, aesthetics,
and usability gain a competitive advantage.
2. Cost: Managing costs efficiently allows businesses to offer competitive prices while
maintaining profitability. Companies that can produce goods or deliver services at a
lower cost than their competitors can attract price-sensitive customers.
3. Location: The geographic location of a business can affect its access to customers,
suppliers, and distribution channels. An advantageous location can reduce
transportation costs, improve customer convenience, and enhance overall efficiency.
4. Quality: Delivering high-quality products and services builds customer loyalty and
positive reputation. Quality not only satisfies customers but also reduces returns,
warranties, and associated costs.
5. Quick Response: Businesses that can quickly respond to market changes, customer
demands, and emerging trends have an edge. Quick response capabilities allow
companies to adapt their operations to seize opportunities and address challenges
promptly.
6. Flexibility: Operational flexibility enables a business to adjust production or service
delivery based on changing circumstances. This could include changes in demand,
technological advancements, or unexpected disruptions.
7. Inventory Management: Efficient inventory management ensures that a business
maintains the right level of stock to meet customer demand without overstocking or
understocking. This reduces carrying costs and ensures availability when needed.
8. Supply Chain Management: Effectively managing the flow of goods, services, and
information across the supply chain enhances operational efficiency. A well-
optimized supply chain minimizes lead times and costs while ensuring reliability.
9. Service: Exceptional customer service can set a business apart. Providing excellent
post-purchase support, addressing customer inquiries promptly, and resolving issues
effectively contribute to customer satisfaction and loyalty.
10. Managers and Workers: Competent managers and skilled workers are essential for
smooth operations. Well-trained and motivated employees can improve efficiency,
product quality, and innovation, all of which contribute to competitiveness.
Why Some Organizations Fail

1. Neglecting Operations Strategy: Without a clear operations strategy that aligns

with the overall business objectives, a company may struggle to efficiently allocate
resources, resulting in inefficiencies, mismanagement, and an inability to adapt to
changing market conditions.
2. Failing to Take Advantage of Strengths and Opportunities: If a business doesn't
recognize and leverage its own strengths and the opportunities present in the
market, it can miss out on potential growth and innovation. Capitalizing on strengths
and opportunities helps businesses stay competitive and adaptable.
 3. Failing to Recognize Competitive Threats: Ignoring or underestimating the
competition can lead to complacency and inability to respond to shifts in the market.
Not identifying competitive threats can leave a business vulnerable to losing
customers and market share.
4. Too Much Emphasis on Product and Service Design, Not Enough on
Improvement: While innovative product and service design is important, failing to
focus on continuous improvement after launch can lead to stagnation. Neglecting
ongoing enhancement and adaptation can result in losing relevance in a rapidly
changing market.
5. Neglecting Investments in Capital and Human Resources: Inadequate investment
in essential resources like technology, equipment, and skilled personnel can hinder a
business's ability to deliver quality products/services efficiently. This can lead to
production delays, subpar offerings, and customer dissatisfaction.
6. Failing to Establish Good Internal Communications and Cooperation: Poor
internal communication and collaboration can lead to confusion, duplication of
efforts, and conflicts among employees. This not only affects productivity but also
the overall morale of the workforce.
7. Failing to Consider Customer Wants and Needs: Businesses that don't prioritize
understanding and fulfilling customer wants and needs risk losing customer loyalty.
Ignoring customer feedback and preferences can result in products or services that
are out of touch with the market.

These reasons collectively highlight the importance of strategic thinking, adaptability,

efficient resource allocation, effective communication, and customer-centricity in running a
successful business. Addressing these potential pitfalls can significantly enhance a
business's chances of survival and growth in a competitive marketplace.

Famous Company that Fails

Nokia: Nokia was once a dominant player in the mobile phone industry. However, it failed to keep
up with the rapid rise of smartphones and the Android and iOS platforms. Nokia's market share
declined significantly, leading to its acquisition by Microsoft in 2014.

BlackBerry: BlackBerry was a leader in the smartphone market, but the company couldn't keep up
with competitors like Apple's iPhone and Android devices. Their market share dwindled, leading to
significant financial and strategic challenges.

Toys "R" Us: One of the world's leading toy retailers, Toys "R" Us struggled with heavy debt and
increased competition from online retailers like Amazon. The company filed for bankruptcy in 2017
and later liquidated its US operations.

STOP STOP STOP STOP

NEXT MEETING
HIERARCHICAL PLANNING
Hierarchical planning is the process of breaking down complicated
tasks into more manageable, smaller subtasks. It includes classifying
objectives and activities into tiers that are arranged in a hierarchy, with
higher-level goals at the top and more specific actions at the bottom. By
breaking down the complexity of planning into smaller, easier to grasp
components, this hierarchical structure aids in managing it.
The basic goal of hierarchical planning is to break down a
complicated issue into a number of smaller issues that can each be
resolved on its own. The answers to these subproblems, which are often
simpler to solve than the main problem, are then merged to accomplish the
main objective.
 Vision- how the company sees itself in the future.
 Mission- the reason for a organization’s existence
 Goals- provide detail and the scope of the mission
 Strategy
Organizations have Organizational strategies:
– Overall strategies that relate to the entire organization
Organizations have Functional Level strategies:
– Strategies that relate to each of the functional areas and that support achievement of
the organizational strategy
 Tactics and Operations

Why Productivity Matters

• High productivity is linked to higher standards of living
– As an economy replaces manufacturing jobs with lower productivity service jobs, it is more difficult
to maintain high standards of living
• Higher productivity relative to the competition leads to competitive advantage in the marketplace
– Pricing and profit effects
• For an industry, high relative productivity makes it less likely it will be supplanted by foreign industry
Service Sector Productivity
• Service sector productivity is difficult to measure and manage because
– It involves intellectual activities
– It has a high degree of variability
• A useful measure related to productivity is process yield
Factors Affecting Productivity
• Methods
• Capital
• Quality
• Technology
• Management
Improving Productivity
1. Develop productivity measures for all operations
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish reasonable goals
5. Make it clear that management supports and encourages productivity improvement
6. Measure and publicize improvements