Operations Management

Business Policy and Inter-relationships

Week 2-b
Factors determining policy
Inter-relating factors
OM History
 Corporate strategy

Overall strategy adopted

by the firm that defines the
specific businesses in
Corporate
which the firm will compete
and the way in which Business

resources are acquired Functional

and allocated.
Operational
 External
The Resource Based View Environmental
Key Factors
Strategy:
Desired Objectives Mission The way
Outcome ahead
Scorecard Defined
that measures Relevant
Soft & Hard Inspiring Organisational
Targets Measurable Capabilities

Resources
Tangible Intangible Human

Physical Financial Technology Reputation Culture Specialised Communicative

Systems Core beliefs Skills & & interactive
knowledge abilities Motivation
 Business Policy and
Operations Objectives
Policy determines specific operational targets.
Influences on policy are:

 Organisational goals
 Financial
 Marketing
 Operations
 Environmental factors
 Resource availability
 Culture
 Systems
 Ownership
 Business Policy

Products Manner
Markets
Services of serving

Nature of the demand

Feedback

Feasibility Desirability

Operations Objectives
Structure
Strategy
The Operations Manager
 Skills
 Living within the structures
 Linking supplier/s and customers
Linking OM to Customers and Suppliers

 Value Chain
 Steps an organization requires to produce a good or a
service regardless of where they are performed.
 Virtual enterprises: fully integrated and interlocked
networks of interdependent companies.
 Outsourcing Offshore
 Jobs are now outsourced worldwide.
 Originally outsourcing involved primarily
manufacturing jobs; increases in technology now
allow the outsourcing of white collar jobs.
The Value Chain and Its Support Functions
Inter-relationships and
the Value-Chain
 New:
 Operations is involved with all aspects of the
process from supplier to the customer.
Marketing, accounting, HR, etc., are outside
the direct value chain.
 Old:
 Operations responsible for the function eg.
purchasing, warehousing and distribution,
manufacturing, processing, construction.
Roles and Communication
 Marketing - specification
 Defines
service/product, price, forecast of
demand, promotion.
 Operations – feasibility
 Know-how,
skills, equipment, supply, time-
management
External “efficiency”
 Measured by:
 Customer satisfaction
 Market share
Historical Development of OM
Prior to 1900
 Cottage industry
produced custom-
made goods.
 Watt’s steam engine in
1785.
 Whitney’s
standardized gun parts
in 1801.
 Industrial Revolution
began at mid-century.
Historical Development of OM (cont.)

 Scientific Management (Frederick W. Taylor)

 Systematic approach to increasing worker productivity
through time study, standardization of work, and
incentives.
 Viewed workers as an interchangeable asset.
 Other Management Pioneers
 Frank and Lillian Gilbreth
 Motion study and industrial psychology
 Henry L. Gantt
 Scheduling and the Gantt chart
Historical Development of OM (cont.)

 Moving Assembly Line (1913)

 Labor specialization reduced assembly time.
 Hawthorne Studies
 Yielded unexpected results in the productivity
of Western Electric plant workers after
changes in their production environment.
 Led to recognition of the importance of work
design and employee motivation.
Historical Development of OM (cont.)

 Operations Research (Management Science)

 Outgrowth of WWII needs for logistics control and
weapons-systems design.
 Seeks to obtain mathematically optimal (quantitative)
solutions to complex problems.
 . OM Emerges as a Field (cont’d)
 1950–1960, OM moved beyond industrial engineering
and operations research to the view of the production
operation as a system.
Historical Development of OM (cont.)
 The Marriage of OM and IT
 Integrated solutions approaches
 Business process reengineering
 Supply chain management
 Systems integration (SAP)

 Operations Management in Services

 OM concepts can apply to both manufacturing and
service operations.
 Integration of Manufacturing and Services
 Conducting world class operations requires
compatible manufacturing and service operations.
Review
Case Study: Qormi Post Office
2. Answer questions 1 and 2
3. Identify resources.
4. What is the focus of resource utilisation?
5. What service gaps are identifiable?
6. Is there evidence of balancing service
requirements?
 The Pareto Principle
Wilfredo Pareto a 19th century Italian economist identified:

The 80/20 Phenomenon

Examples such as:
6. 80% of the wealth is held by 20% of the population (Lorenz Curve).
7. 80% of inventory value is in 20% of stock held.
8. 80% of sales come from 20% of customers.
9. 20% of roads have 80% of total accidents.

We see the Pareto Principle in action in our everyday lives, where most of the
decisions we make are relatively unimportant but a few shape our future.
Especially used in quality management.