Fundamentals of Operations Management

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Operations Management
Fundamentals of Operations Management
Week 1

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HISTORICAL ASPECTS AND PROSPECTS FOR THE DEVELOPMENT OF
OPERATIONS MANAGEMENT
• Operations management is the activity of developing, using and improving business
processes aimed at producing the main types of products and services.
• The basis of production is the efficiency and rationality of the organization of
management of operations that are key for the employees and clients of the organization.
Operations are considered as any type of human activity associated with the processing of
resources into products and services.

3.

In today's highly competitive environment, organizations can only maximize their
revenues by achieving customer goals. The most profitable modern organizations do this
by involving their customers in their own production processes. But this does not happen
directly, since consumers of final products do not command production processes
themselves, but indirectly, through various information channels and feedback systems
(an example of this is the actions of such organizations asMicrosoft,Wal-Mart). Actions to
achieve the goals of clients and organizations become integrated and complementary,
forming the basis of operations management as a learning innovative system for
managing an organization.

4.

The operations management system is inextricably linked with other organizational systems
and the operating environment as a whole, which, in turn, can influence activities in two
ways - directly determining the functions of the organization and indirectly, influencing
factors of direct influence. Moreover, each type of interaction with the environment forms
its own types of operations that have a certain character.

5.

• 1. Strategic— determines methods of production of products and services, territorial
placement of office and production premises, production facilities, development of
equipment layouts, comprehensive training of production and personnel.
• 2. Tactical— predetermines the amount of resources required for a given production of
goods and services, the need for them, plans and schedules for the involvement of
external resources in production processes.
• 3. Operational- is associated with the planning and management of operations, as well as
with identifying those responsible for each area of ​work, including the management of
just-in-time operating systems and the management of maintenance operations for
production facilities.

6.

Operational activities specify the implementation of any functions of the organization, focus
attention on the content and sequence of targeted actions related to the production of a
specific product or the provision of a service.
The task of operational management is directly implemented by first-line managers, i.e. e.
site foremen, functional department managers (sales managers, individual financial
functions, operational planning managers).
As can be seen from Fig. 1.1, the levels of operating environments are one step below the
organizational environments. Its external environment is limited by the tasks of business
units of a large organization - obtaining the necessary resources and manufacturing
products. But in contrast to the schemes that characterize the activities of the organization
as a whole, operational activities are associated with extreme detail in the content and
timing of each function of the organization and even the component parts of this function.
For example, we set the following tasks for the foreman of a section of computer-controlled
machines.

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Fig. 1.1. Operational activities in the organization's
management system

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Ensure the production of a certain number of standardized workpieces at an average
specified cost (or intra-shop price).
Ensure clear organization of the production process, equipment re-adjustment and
delivery of materials. Downtime should not exceed 5% of total working time.
Ensure standard high quality of products, while the share of rejected products should not
exceed 1.5%.
Clearly monitor the implementation of work schedules on time by all performers. Be
attentive to workers' complaints and comments. Give answers to complaints, taking into
account their complexity, within one or two shifts.

9.

The Product Sales Manager is responsible for:
Serve customer requests with high efficiency. Provide answers to requests, if the
necessary information is available, within two hours;
ensure the volume of sales of the established range of products in a strictly defined
quantity, at a predetermined price (sales price) for a fixed amount;
distribute the overall established sales task among its sales agents, ensure control over
the implementation and compliance with the following rules:
visiting one customer per day;
maintaining contact with large buyers at least once a month (ten days);
making contacts with other buyers - at least twice a decade.

10.

The financial manager for work with debtors is obliged to:
issue invoices for payment within three days after the conclusion of the transaction;
Conduct credit checks on new buyers within one business day;
ensure that invoice payments are not delayed by more than 2 weeks;
contact customers who have not paid their bills once a week;
provide your direct manager with operational information on the status of payments for
the entrusted area of ​activity once a decade.

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The smooth functioning of the organization as a whole is facilitated by the presence of
systems such as:
control system (which carries out a targeted, systematic impact on the resources of the
organization, including the subject of management or the manager of the organization);
a managed system (which is amenable to targeted, systematic influence, includes
management objects, namely resources - personnel, finance, production, information
and intangible assets of the organization).
The management system influences objects (resources) through operational technologies activities through which the transformation of resources into products and services is
managed.

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Resources play a primary role in the selection of operational impacts, since each of
them affects the competitiveness of the organization as a whole. In international
practice, operational resources are called the “five Ps”.
1. Staff (people).
2. Projects (divisions) (plants).
3. Semi-finished products, materials, components (parts).
4. Processes (processes).
5. Planning and management system (planning and control systems).
The practice of recent years shows that it is necessary to supplement this list with such
important resources for production as finance, information and intangible assets of the
organization (for example, reputation, image of the organization, etc.).

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SYSTEM APPROACH TO MANAGEMENT
In an organization's management system, resources come under the influence of a
management process that includes a number of successive stages.
1. Login stage— the input elements for the organization are the following resources:
information (intangible assets and communications), personnel, finance, production
(including material resources, means and objects of labor). In this case, the influence on the
entrance to the system is the order of the manager, the instruction of a higher organization,
a legislative act, etc.

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2. The second stage is production functions - during their implementation, resources are
converted into products and services, i.e. e. the organization of production is carried out (or,
as it is also called, the operating system of the organization). It consists of processing and
supply subsystems. It is in the processing subsystem that operations are performed that are
directly related to the transformation of input quantities into output results (for example, in
the production of products - procurement, assembly and other operations; in the production
of services - consulting, selling cars, manufacturing food and drinks). The supply system is
not directly related to the production of goods and services, but it performs operations
without which the processing subsystem would not be able to function (warehouse, repair,
cleaning, etc.).

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3. Third stage is to generate feedback that allows you to optimize the production process.
Feedback should be carried out both with the internal and external environment, since
feedback from the external environment influences the formation of the cost of
manufactured products, adjustments in production volumes and nomenclature. Feedback
from the internal environment allows you to adjust the parameters of the resources used in
the organization (personnel qualifications, the amount of financial and material resources
used in the organization, the production resources involved, the development of
information channels in the organization, etc.). Feedback is provided through the
implementation of planning and control functions. Planning involves choosing goals and
determining ways to implement them, drawing up the necessary production documents
(plans, schedules, etc.).

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• 4. The fourth stage is the release of the results of the production process to the external
environment to consumers. The results of the operations management process are the
achievement of the goals set by the organization, products, which consist of a material
component (product) and an intangible component (service).
• The operations management process is determined by functions (Figure 1.2).

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The nature of the production process determines the type of processing system, which can
be:
a single system (design), characterized by the uniqueness of the final product, the
duration of the production process, the involvement of all resources in the production of
a single product or service in a specific period (for example, the process of
manufacturing a unique product such as a spaceship, nuclear icebreaker, etc.);
a serial production system in which individual production areas and workshops
specialize in performing various operations, the technological routes of manufactured
goods and services vary, products pass through the system in units or small groups,
resources can be redistributed in areas (for example, the production of dated organizers
or diaries for the year, production of books and periodicals of magazines, cars);

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Planning
Entering a system
(resources)
Manufacturing
organisation
Control and
feedback
Entire control of
manufacture
Fig. 1.2.Process management operations
Output
(production)

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a mass-flow production system, characterized by large volumes of uniform products and
services that pass through it quite quickly, and production resources are ordered in a
certain sequence, forming a production line throughout the system (for example, the
production of toothpicks, matches);
a system with a continuous production process, characterized by significant volumes of
homogeneous products; Since the resources entering it pass through it in a continuous
flow, stopping the system can lead to significant costs for restoring the production
process and to a decrease in the quality of the products produced (for example, the
production of enameled tiles, steel production).

20.

The peculiarity of the support system is that, depending on the specifics of production, it
may also belong to the processing system. Thus, for manufacturing organizations, the
accounting service belongs to the support system, and for organizations providing
outsourcing services, it belongs to the processing subsystem.

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When studying the process of operations management, it is important to establish feedback
with external factors affecting the organization, and above all with the market in which the
organization's products and services are sold. Feedback is carried out by processing
information coming from both the external and internal environment. Information entering
the planning and control system undergoes multi-stage processing. First, the analysis of the
data obtained allows us to build work plans, determining their volumes, as well as the
necessary resources for their implementation. Subsequently, the information in the form of
plans enters the processing system and support system. Comparison of completed work
with planned work occurs in the control subsystem, which is inseparable from the planning
subsystem,

22.

The process of converting inputs is very complex because each type of organization has its
own set of inputs, transforming operations, and resulting finished products. In some
organizations they are identifiable, in others they are not. Thus, for a bakery, the initial
resources for baking baked goods are: flour, sugar, eggs, water, spices, aromatic and
flavoring additives, production facilities and equipment, energy resources and skilled labor.
The resource conversion process includes procedures for mixing products, actually baking
and glazing products. The end result of the operations is various bakery products that are
valuable to the consumer.

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But in some cases, the original resources are not easily identifiable.
In the university education system, the main components of the initial resources are books,
scientific articles, videos, CDs, knowledge of teachers, and abilities of students. Since
production in this case concerns abstract actions (acquiring knowledge, obtaining new
skills and abilities), it is very difficult to observe the process of transformation of these
resources. At the same time, transformative processes radically change the initial resources,
forming new knowledge and approaches.

24.

Week 1: REVIEW AND DISCUSSION QUESTIONS (workshop):
Work in small groups, answer the following questions:
1. Define the concept organization.
2. What resources are allocated when managing operations?
3. What is the difference between industrial and service organizations?
4. What is the main purpose of operations management?
5. What are the main tasks performed to achieve the objectives of operations management?
6. What are the main strategic objectives in operations management?
7. What are the main tactical tasks in operations management?