OPERATIONS MANAGEMENT with TQM (OPEQUAL)
Operation is a function in an organization that is responsible for creating goods and/or services.
Goods are tangible items produced by the organization while services are activities that they render
to the customers.
Services involve elements of time, location, form or psychological value that organizations perform.
Operations Management is the management of processes that transform an organization's inputs
into goods and services that add value for the customer. The goal of operations management is to
maximize efficiency by producing products at a lower cost while being able to fulfil and satisfy
their customer needs. It deals with the creation of goods and services which we come in contact to
every day.
A cross-functional perspective is deemed necessary in order to facilitate smooth organizational
processes.
Importance of studying operations management
Enables students to prepare for future employment
The knowledge that you will gain will be useful for you regardless of any career path you
take
Manufacturing produces a tangible output, in the form of a good.
Production may occur in the factory or elsewhere, like farms, restaurants, etc.
Service deals with performance of an act.
Basic Functions in an Organization
1. Operations – The function in an organization that is responsible for producing goods and/or
delivering the services. The operations function is the core of the organization for without its
products and services, there would be no need for other functions.
2. Finance – The function which is responsible for allocating the resources of the organization and
securing their financial resources. They are also involved in budgeting, preparing and analyzing
investment proposals and ensuring that necessary funds are available for operations.
3. Marketing – The function which is responsible for assessing the needs and wants of the
consumers and in selling and promoting the organization’s goods and services.
Organizations exist because of their products and services, which is created and delivered through
the operations function. Support functions' (marketing, finance, human resource, etc.) responsibility
is to ensure that they are able to provide for the needs of the operations.
Operations management is the management of that part of the organization that creates products
and services.
Supply chain is the sequence of how the organization produces and delivers these products and
services. It involves the facilities, functions and all activities related to sourcing the raw materials
until the products and services reach the final customers.
The Input-Transformation-Output Process
Inputs (capital, labor, information, etc.) are transformed through different processes in order to
create outputs (goods or services) that provide value to customers (value dded).
Measurements (feedback) are likewise taken at various points of the process and are compared to
standards to determine necessary corrective action (control).
Trends and Challenges Facing Operations Management
1. Economic Conditions 2. Intense Competition
3. Technology/ Innovations 4. Environmental Concerns
5. Ethical Issues 6. Cyber-security
Historical Development Operations Management
1. Industrial Revolution
2. Scientific Management
3. Human Relations Movement
4. Decision Models and Management Science
5. The influence of Japanese Manufacturers
Operations strategy is focused in defining the role and activities of the operations function of the
organization. It focuses on capabilities that enable the firm to gain competitive advantage.
Operations is responsible in ensuring that strategies are effectively implemented.
A well-thought-of strategy is useless if the operations function would not be able to implement it as
envisioned by the organization.
Strategy is an organization’s action plan to achieve the mission.
Mission Statement is a statement defining the purpose why an organization exists.
Core Competencies attributes that give an organization a competitive edge.
Mission statement defines the purpose of an organization's existence. It is the first step in order to
come up with an effective strategy. It also discusses the present business of the organization and
serves as a basis for its goals and strategies.
Three Basic Business Strategies
1. Low Cost
This is achieved through cutting down on their expenses by locating in a place with a low labor cost
and through achieving economies of scale. Economies of scale are attained when an organization
becomes more efficient. This means that they are able to increase their production and lower their
operating costs.
2. Differentiation
It enables the organization to produce products that are remarkably differentiated from the
others which are offering the similar ones. It can relate to product or service features, quality,
reputation, or customer service.
3. Responsiveness
It refers to how quick and flexible the organization responds to the needs or the demands of their
customers.
Competitiveness refers to how effective an organization is in terms of meeting the needs and wants
of other companies that offer similar output. To become competitive, organizations offer high
quality products at better prices or utilize heavy advertising and catchy promotions.
Reasons for Business Failure
Businesses usually only focus on making plans, but does poorly when it comes to execution
Poor management of their operations
The importance of knowing these could make organizations deal with issues that may hinder their
success. Upon knowing the probable reasons for failure, the company can come up with strategies
that are fit with their budget, manpower, and capacity, and that are aligned with their mission and
direction.
Environment Scanning, also referred to as SWOT Analysis, is the process of assessing
the Strengths, Weaknesses, Opportunities and Threats abounding the organization. Strengths
and Weaknesses are internal to the firm, and which an organization typically has a control of.
Two types of strategies that organizations have basically pursued:
1. Quality-based strategies focus on improving the quality of an organization's output.
Organizations may be motivated to pursue this because they are doing poorly on quality aspect and
they would want to catch up with their competitors.
2. Time-based strategies are utilized by organizations who want to reduce time in terms of
introducing innovations or responding to customer demand. Organizations intend to reduce time
because by doing so, they can have the first mover advantage, thereby gaining more customers than
their competitors.
Productivity means making efficient use of your resources. For organizations, productivity refers
the effective use of their resource, or the ratio of output to input. It has important implications for
both non-profit and profit organizations. Having high productivity means lower costs for non-profit
organizations. It also tells how competitive profit-based organizations are. Productivity growth is
particularly important for nations as it has large impact on the economy and people's standard of
living.
How to Compute for Productivity Growth and Productivity?
Productivity can be computed based on a single input (partial productivity), on more than one input
(multifactor productivity), or on all inputs (total productivity). The formula for computing for
productivity is expressed as:
How do we compute for productivity growth?
Productivity growth is the increase in productivity from one period to the next relative to the
productivity in the preceding period.
Productivity in services is more difficult to measure since inputs and outputs varies. Just imagine
how hard it is to measure productivity for consultations services, repair works, surgery, etc.
Identifying ways on how to make productivity improvements for the service sector is as relevant as
it is for manufacturing companies.
