Operation Management

Definition: A set of activities that create goods and services by transforming INPUT to OUTPUT
10 Critical Decisions:

1. Quality – How to define quality?

2. Service/Product Design – What to offer – goods? How to Package it?

3. Process/ Capacity Design – What process required? Need any software?

4. Location – where factory?

5. Layout – Arrangement of machines

6. Human Resource/ Job Design – Work environment?

7. Supply Chain Management – Buy or make it? Who are suppliers? Who are our customers?

8. Inventory, JIT – When to reorder?

9. Scheduling – Subcontract goods? When to deliver goods?

10. Maintenance – How to maintain/ store?

Goods	Services
Tangible	Intangible
Production separate from consumption	Production & consumption at the same time
Low customer interaction	High customer interaction
Consistent product definition	Unique, inconsistent product definition
Can be stored/ inventory	No inventory
	Often skill, knowledge based

1. Measure of process improvement

2. Represent OUTPUT relative to INPUT

Unit Produced OUTPUT

Productivity = --------------------------------- = -------------------------

3. Productivity risen living standard

4. Productivity Variables:

o Labour (10%):

§ Basic education

§ Diet of labour force – wages, salary

§ Social Overhead that make labour available. E.g.: Transportation, Sanitation

§ Maintain/ Enhance labour skills

o Capital (38%):

§ Capital investment – Machines to increase production.

o Management (52%):

§ Knowledge, Technology, Education

Output

Productivity = ---------------------------------------------------------------------------------------------

Labour + Material + Energy + Capital (Internal Variables)

5. Measurement Problems:

o Quality can be changed although productivity increase

o Precise unit of measure lacking

o External variable/ element may change productivity – disaster & decrease in money value

6. Ways to upgrade Labour Productivity:

o Basic education for labour

o Salary/ Wages/ Incentives for labour (motivation)

o Training skills to improve labour work process

o Social overhead that make labour available