Historical Development of OM

Industrial revolution brought in innovations that changed production by

using machine power instead of human power.
Scientific management brought the concepts of analysis and
measurement of the technical aspects of work design and development
of moving assembly lines and mass production.
Human relations movement focused on understanding human elements
of job design, such as worker motivation and job satisfaction.
Management science focused on the development of quantitative
techniques to solve operations problems.
Computer age enabled processing of large amounts of data and allowed
widespread use of quantitative procedures.
Environmental issues considered waste reduction, the need for
recycling and product reuse.
Just-in-time designed to achieve high volume production with minimal
inventories.
Total quality management sought to eliminate causes of production
defects and making quality the responsibility of everyone.
Reengineering required redesigning a companys processes in order to
provide greater efficiency and cost reduction.
Global competition designed operations to compete in the global
market.
Flexibility offered customization on a large scale.
Time-based competition based on time, such as peed of delivery
Supply chain management focused on reducing the overall cost of the
system that manages the flow of materials and information from
suppliers to final customers
Electronic commerce uses the internet and World Wide Web for
conducting business activity. | B2B | B2C | C2C
Outsourcing and flattening of the world outsourcing is obtaining
goods/services from an outside provider. Technology has enabled
outsourcing of virtually any job from anywhere, therefore flattening the
world.

Todays OM environment
Lean systems concept that takes a total system approach to creating
efficient operations
Enterprise resource planning large, sophisticated software systems
used for identifying and planning the enterprise-wide resources needed

to coordinate all activities involved in producing and delivering

products.
Customer relationship management software solutions that enable the
firm to collect customer-specific data.
Cross-functional decision making the coordinated interaction and
decision making that occur among the different functions of the
organization.

Functions within the business organizations

Business organizations have three basic functional areas:
Finance responsible for securing financial resources at favorable
prices and allocating those resources throughout the organization, as
well as budgeting, analyzing investment proposals, and providing funds
for operations.
Marketing responsible for assessing consumer wants and needs, and
selling and promoting the organizations goods or services.
Operations responsible for producing the goods or providing the
services offered by the organization.
Operations also interact with other functional areas of the organization,
including legal, management information systems (MIS), accounting,
personnel/human resources, and public relations.

Operation Management Function

The operations function involves the conversion of inputs into outputs.
The essence of the operations function is to add value during the
transformation process: The operations function involves the conversion of
inputs into outputs.
The operations function includes many interrelated activities, such as
forecasting, capacity planning, scheduling, managing inventories, assuring
quality, motivating employees, deciding where to locate facilities, and more.
Thus, marketing, operations, and finance must interface on product and
process design, quality and quantity decisions, etc. and keeping each other
informed on the others strengths and weaknesses.
The chief role of an operations manager is that of planner/decision
maker. In this capacity, the operations manager exerts considerable influence
over the degree to which the goals and objectives of the organization are
realized.

Productivity
A measure of the effective use of resources, usually expressed as the
ratio of output to input.
Productivity growth = Current productivity Previous productivity
Previous productivity
Partial measures =

Output
Labor

Multifactor measures =

Output
Machine

Output
Labor + Machine

Output
Capital

x 100

Output
Energy

Output
Labor + Capital

+ Energy
Total measure =

Goods or services produced

All inputs used to produce them

Factors That Affect Productivity

Numerous factors affect productivity. Generally, they are methods,
capital, quality, technology, and management.

Operations Strategy
Operations strategy relates to products, processes, methods, operating
resources, quality, costs, lead times, and scheduling. Operations strategy
must be consistent with the overall strategy of the organization, and with the
other functional units of the organization.
+ Quality-based strategies focus on maintaining or improving the quality
of an organizations products or services
+ Time-based strategy focuses on reduction of time needed to accomplish
tasks.
The factors that give rise to market opportunities and threats
can be one or more changes:
Economic (e.g., low demand, excessive warranty claims, the need to reduce
costs).
Social and demographic (e.g., aging baby boomers, population shifts).

 Political, liability, or legal (e.g., government changes, safety issues, new

regulations).
Competitive (e.g., new
advertising/promotions).

or

changed

products

or

services,

new

Cost or availability (e.g., of raw materials, components, labor, water,

energy).
Technological (e.g., in product components, processes).

IDEA GENERATION
Ideas for new or redesigned products or services can come from a variety of
sources, including customers, the supply chain, competitors, employees, and
research.
Reverse engineering Dismantling and inspecting a competitors product
to discover product improvements.
Research and development (R&D) Organized efforts to increase
scientific knowledge or product innovation.
R&D efforts may
development.
-

involve

basic

research,

applied

research,

or

Basic research has the objective of advancing the state of knowledge

about a subject, without any near-term expectation of commercial
applications.
Applied research has the objective of achieving commercial
applications.
Development converts the results of applied research into useful
commercial applications.