Managing Operations & Supply Chain

UON - Master in Business Administration

Amity - Post-Graduate Diploma in Management

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Operations management 8th edition

Part One

Directing the operation

Chapter 1
Operations management

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 Assessment

• AS1 - 28th August 2023

• AS2 - 28th August 2023
• Assessment question: On the way from UK (just
arrived this morning!)
• Please check PGDM: Amity’s BlackBoard
• UON MBA : UON NILE

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What is operations management?

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Operations Management

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 Summary of the video
• Operations management is the study of processes used by companies to transform
resources into goods or services.
• It is critical to an organization's success, as most of its financial and human resources are
invested in operations.
• Operations managers are responsible for designing, planning, directing, and improving
activities related to production.
• Four strategic areas of operations management are strategic operations
management, product design, supply chain management, and quality management.
• Strategic operations management involves long-term considerations about the viability
of a business and aligning operations with overall business strategy, while product
design focuses on making decisions about product features. Supply chain management
encompasses activities related to acquiring inputs and delivering outputs, and quality
management involves measuring, maintaining, and resolving quality issues.

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Slack et al.’s model of operations management

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 Key questions

In Chapter 1 – Operations management – Slack et al. identify the following key

questions…

 What is operations management?

 Why is operations management important in all types of organization?
 What is the input-transformation-output process?
 What is the process hierarchy?
 How do operations and processes differ?
 What do operations managers do?

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 Operations management defined

Operations management is the activity

of managing the resources which are
devoted to the production and delivery
of products and services.

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The activities of core functions in some organizations
Core functional Internet service Fast food International Furniture
activities provider (ISP) chain aid charity manufacturer
Maintain hardware Make burgers, Give service to Make
software and etc. the components
Operations content Serve beneficiaries of Assemble
Implement new customers the charity furniture
links and services Maintain
equipment
Promote services Advertise on Develop funding Advertise in
to users and get TV contracts magazines
Marketing
registrations Devise Mail out appeals Determine
and sales
Sell advertising promotional for donations pricing policy
space materials Sell to stores
Devise new Design Develop new Design new
Product / services and hamburgers, appeals furniture
service commission pizzas, etc. campaigns Co-ordinate
develop- new information Design decor Design new with fashionable
ment content for restaurants assistance colours
programmes

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 Operations are everywhere

• The best way to start understanding the nature of

“Operations” is to look around you.
• Everything you can see around you (except the flesh and
blood) has been produced by an operation.
• Every service you consumed today (radio station, bus
service, lecture, etc.) has also been produced by an
operation.
• Operations Managers create everything you buy, sit on,
wear, eat, throw at people, and throw away.
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Operations management in all types of
organization

Automobile assembly factory – Operations

management uses machines to efficiently
assemble products that satisfy current
customer demands

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 Operations management in all types of
organization

Physician (General practitioner)

– Operations management uses Source: Shutterstock.com: Stuart Jenner

knowledge to effectively diagnose

conditions in order to treat real
and perceived patient concerns

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Operations management in all types of
organization

Management consultant – Operations

management uses people to effectively
create the services that will address
current and potential client needs

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Operations management in all types of
organization

Disaster relief
charity – Operations
management uses
ours and our partners’
resources to speedily
provide the supplies
and services that
relieve community
suffering

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 Operations management in all types of
organization

Advertising agency – Operations

management uses our staff’s knowledge
and experience to creatively present
ideas that delight clients and address
their real needs

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Operations management uses…
machines to efficiently assemble products

diagnose to treat real and

knowledge to effectively perceived patient
conditions
concerns

people to effectively create services that will

address current and
potential client
needs

ours and our to speedily provide supplies and

partners’ services that relieve
resources community suffering

our staff’s to creatively present ideas that delight

knowledge and clients and address
experience their real needs

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 Operations management is changing
The business environment is changing, for Prompting operations responses, for example…
example…
 Increased cost-based competition Globalization of operations networking
 Higher quality expectations Information-based technologies
Internet-based integration of operations activities
 Demands for better service
Supply chain management
 More choice and variety Customer relationship management
 Rapidly developing technologies Flexible working patterns
Mass customization
 Frequent new product/service introduction
Fast time-to-market methods
 Increased ethical sensitivity Lean process design
 Environmental impacts are more Environmentally sensitive design
transparent Supplier ‘partnership’ and development
Failure analysis
 More legal regulation
Business recovery planning
 Greater security awareness

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Operations input resources and outputs

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Examples of dominant transformed resource inputs
Predominantly processing Predominantly processing Predominantly processing
inputs of materials inputs of information inputs of customers

All manufacturing operations Accountants Hairdressers

Mining companies Bank headquarters Hotels
Retail operations Market research company Hospitals
Warehouses Financial analysts Mass rapid transports
Postal services News service Theatres
Container shipping line University research unit Theme parks
Trucking companies Telecoms company Dentists

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Figure 1.4
Changes in the business environment are shaping a new operations agenda

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Most operations produce products and services

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 Some operations described in terms of their processes
Operation Some of the operation’s Some of the operation’s Some of the operation’s
inputs processes outputs
Airline Aircraft Check passengers in Transported passengers
Pilots and air crew Board passengers and freight
Ground crew Fly passengers and freight around
Passengers and freight the world
Care for passengers
Department Products for sale Source and store products Customers and products
store Sales staff Display products ‘assembled’ together
Information systems Give sales advice
Customers Sell products
Police Police officers Crime prevention Lawful society, public with a
Computer systems Crime detection feeling of security
Information systems
Public (law-abiding and Information gathering
criminals) Detaining suspects
Frozen food Fresh food Source raw materials Frozen food
manufacturer Operators Prepare food
Processing technology Freeze food
Cold storage facilities Pack and freeze food

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Example of analysis at three levels (1 of 3)

The supply network-flow between operations

Studios Promotion The programme

agency
and video
Casting Broadcasting supply network
agency company
Programme
/ video
Creative maker
agency

The operation-flow between processes

The
programme
and video
operation

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Example of analysis at three levels (2 of 3)
The supply network-flow between
operations

Programme
and video
operation

The operation-flow between processes

Engineer
-ing

Marketing Finance and Production Post

and sales accounting unit production

Set and props The programme and

manufacture video operation

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Example of analysis at three levels (3 of 3)
The supply network-
flow between
Programme
and video operations
maker

The operation-
flow between
processes

Set and props

manufacture

The ‘Set and Set

construction
props Set Set
manufacturing’ design finishing
Props
process acquisition

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Table 1.4
Some examples of processes in non-operations functions

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Two ‘end-to-end’ business processes

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A typology of operations and processes (1 of 4)

The implications of high and low Volume in operations and

processes…

Implications Implications

• Low repetition
• Each staff member Low • High repeatability
performs more of Volume High
High
each task • Specialization
• Less systemization • Capital intensive
• High unit costs • Low unit costs

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A typology of operations and processes (2 of 4)

The implications of high and low Variety in operations and

processes…

Implications Implications

• Flexible • Well defined

• Complex High Variety High
Low • Routine
• Match customer • Standardized
needs • Regular
• High unit costs • Low unit costs

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A typology of operations and processes (3 of 4)

The implications of high and low Variation in operations and

processes…

Implications Implications

• Changing • Stable
capacity Variation in
High High
Low • Routine
• Anticipation demand
• Predictable
• Flexibility
• High utilization
• In touch with
demand • Low unit costs
• High unit costs

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A typology of operations and processes (4 of 4)

The implications of high and low Visibility in operations and

processes…

Implications Implications

• Short waiting • Time lag between

tolerance production and
High Visibility Low
High
• Satisfaction consumption
governed by • Standardization
customer • Low contact skills
perception • High staff
• Customer contact utilization
skills needed • Centralization
• Received variety is • Low unit costs
high
• High unit costs

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It is important to understand how different operations are
positioned on the four Vs.

Is their position where they want to be?

Do they understand the strategic implications of their position?

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Slack et al.’s general model of operations management

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To be a great Operations Manager you need to…
• Enjoy getting things done – Operations management is about doing things.
• Understand customer needs – Operations management is about understanding what ‘value’ means for
customers.
• Communicate and motivate – Operations managers must be ‘people people’.
• Learn all the time – Operations management is about learning, because without learning there can be no
improvement.
• Commit to innovation – Operations management is about being creative, imaginative, and (sometimes)
unconventional.
• Know your contribution – Operations management is about contributing to the effective working of other
functions.
• Be capable of analysing – Operations management is about evaluating decisions.
• Keep cool under pressure – Operations managers need to be able to remain calm no matter what
problems occur.

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Operations management
8th edition

Chapter 2

Operations
performance

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Slack et al.’s model of operations management

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 Key questions

In Chapter 2 – Operations performance – Slack et al. identify the following key

questions…

 Why is operations performance vital in any organization?

 How is operations performance judged at a societal level?
 How is operations performance judged at a strategic level?
 How is operations performance judged at an operational level?
 How can operations performance be measured?
 How do operations performance objectives trade off against
each other?

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 Three levels of operations performance

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Stakeholder groups with typical operations objectives

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How operations can impact TBL (Triple Bottom Line) performance (1 of 3)
• Recyclability of materials, energy consumption and waste material
generation
• Reducing transport-related energy
• Noise pollution, fume and emission pollution
• Obsolescence and wastage
• Environmental impact of process failures
• Recovery to minimize impact of failures

Planet – The environmental account,

measured by environmental impact of
the operation

People – The social Sustainability Profit – The economic

account, measured by account, measured by
the impact of the profitability, return on
operation on the quality assets, etc. of the
of people’s lives operation

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How operations can impact TBL performance (2 of 3)

Planet – The environmental account,

measured by environmental impact of
the operation

People – The social Sustainability Profit – The economic

account, measured by account, measured by
the impact of the profitability, return on
operation on the quality assets, etc. of the
of people’s lives operation

• Customer safety from products and services

• Employment impact of an operation’s location
• Employment implications of outsourcing
• Repetitive or alienating work
• Staff safety and workplace stress
• Non-exploitation of developing country suppliers
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How operations can impact TBL performance (3 of 3)

Planet – The environmental account,

measured by environmental impact of
the operation

People – The social Sustainability Profit – The economic

account, measured by account, measured by
the impact of the profitability, return on
operation on the quality assets, etc. of the
of people’s lives operation

• Cost of producing products and services

• Revenue from the effects of quality, speed,
dependability, and flexibility
• Effectiveness of investment in operations resources
• Risk and resilience of supply
• Building capabilities for the future
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OM’s contribution to the ‘economic bottom line’

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 Company A has operations managers who…
Employ skilled, enthusiastic people, and encourage them to contribute ideas for
cutting out waste and working more effectively.

Carefully monitor their customers’ perception of the quality of service they are
receiving and learn from any examples of poor service and always apologise and
rectify any failure to give excellent service.

Have invested in simply but appropriate systems of their own that allow the
business to plan and control its activities effectively.

Hold regular meetings where staff share their experiences and think about how they
can build their knowledge of customer needs, new technologies and how their
services will have to change in the future to add value for their customers and help
the business to remain competitive.
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Last year’s financial details for Company A

Sales revenue = €10,000,000

Wage costs = €2,000,000
Supervisor costs =
€300,000
General overheads = €1,000,000
Bought-in hardware = €5,000,000

Margin = €1,700,000
Capital expenditure =
€600,000

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 Company B has operations managers who…

Employ only people who have worked in similar companies before and
supervise them closely to make sure that they ‘earn their salaries’.

Have rigid ‘completions of service’ sheets that customers sign to say that
they have received the service, but they never follow up to check on
customers’ views of the service that they have received.

Have bought an expensive integrative system with extensive functionality,

because ‘you might as well invest in state-of-the art technology’.

At the regular senior managers’ meeting always have an agenda item entitled
‘Future business’.

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Last year’s financial details for Company B

Sales revenue = €9,300,000

Wages costs = €1,700,000
Supervisor costs = €800,000
General overheads = €1,300,000
Bought-in hardware = €6,500,000

Margin = €700,000
Capital expenditure = €1,500,000

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 The effects of three options at Kandy Kitchens
Original – Option 1 – Option 2 – operations Option 3 – ‘speedy
(sales volume = sales campaign efficiency service’
50,000 units) Increase sales Reduce operating Increase price by
volumes by 30% to expenses by 20% 10%
65,000 units
(€,000) (€,000) (€,000) (€,000)

Sales revenue 5,000 6,500 5,000 5,500

Operating 4,500 5,550 3,800 4,500

expenses

EBIT 500 1,000 1,200 1,000

Investment 100 70
required

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 Typical stakeholders’ performance objectives (1 of 2)
Stakeholder What stakeholders want from the What the operation wants from
operation stakeholders
Shareholders Return on investment Investment capital
Stability of earnings Long-term commitment
Liquidity of investment
Directors/top management Low/acceptable operating costs Coherent, consistent, clear and achievable
Secure revenue strategies
Well-targeted investment Appropriate investment
Low risk of failure
Future innovation
Staff Fair wages Attendance
Good working conditions Diligence/best efforts
Safe work environment Honesty
Personal and career development Engagement
Staff representative bodies Conformance with national agreements Understanding
(e.g. trade unions) Consultation Fairness
Assistance in problem solving
Suppliers (of materials, Early notice of requirements Integrity of delivery, quality and volume
services, equipment, etc.) Long-term orders Innovation
Fair price Responsiveness
On-time payment Progressive price reductions

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 Typical stakeholders’ performance objectives (2 of 2)

Stakeholder What stakeholders want from the What the operation wants from
operation stakeholders
Regulators (e.g. Conformance to regulations Consistency of regulation
financial regulators) Feedback on effectiveness of regulations Consistency of application of regulations
Responsiveness to industry concerns

Government (local, Conformance to legal requirements Low/simple taxation

national, regional) Contribution to (local/national/regional) Representation of local concerns
economy Appropriate infrastructure

Lobby groups (e.g. Alignment of the organization’s activities No unfair targeting

environmental with whatever the group are promoting Practical help in achieving aims (if the
lobby groups) organization wants to achieve them)

Society Minimize negative effects from the Support for organization’s plans
operation (noise, traffic, etc. and
maximize positive effects (jobs, local
sponsorship, etc).

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The five operations’ performance objectives

Quality Being RIGHT

Speed Being FAST

Competitiveness
Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

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The benefits of excelling at the five objectives

Minimum price, highest value

Cost
Quick Dependable
delivery delivery
Minimum cost,
Speed maximum value Dependability
Fast Reliable
Internal
throughput operation
benefits
Error-free Ability to
processes change
Quality Flexibility
On- Frequent new
specification products, maximum
products and choice
services External
benefits

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What does Quality mean in

… a Hospital?

Patients receive the most appropriate treatment.

Treatment is carried out in the correct manner.

Patients are consulted and kept informed.

Staff are courteous, friendly and helpful.

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Two common meanings of ‘Quality’

Quality as the specification of a product or service

e.g. Lower Hurst Farm produces organic meat raised

exclusively on its own farm

Quality as the conformance with which the product or service

is produced
e.g. Quick service restaurants like McDonald’s may buy
less expensive meat, but its conformance must be high

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External and internal benefits of conformance quality

Irrespective of a product or service’s specification quality, producing it so it

conforms to its specification consistently brings benefits to any operation.

Externally – it enhances the product or service in the market, or at least

avoids customer complaints.
Internally – it brings other benefits to the operation.

It prevents errors slowing down throughput speed.

It prevents errors causing internal unreliability and low

dependability.

It prevents errors causing wasted time and effort, therefore saving

cost.

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What does Speed mean in… (2 of 4)

… an automobile plant?

Time between dealers requesting a vehicle of a

particular specification and receiving it is minimized.

Time to deliver spares to service centres is

minimized.

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External and internal benefits of speed

Speed again has different interpretations externally and internally.

Externally – it means the elapsed time between a customer asking for a

product or service and getting it (in a satisfactory condition).
It often enhances the value of the product or service to customers.

Internally – it brings other benefits to the operation.

It helps to overcome internal problems by maintaining dependability.

It reduces the need to manage transformed resources as they pass

through the operation, therefore saving cost.

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What does Dependability mean in… (3 of 4)

… a bus company?

Keeping to the published timetable at all points on

the route.

Constant availability of seats for passengers.

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External and internal benefits of Dependability

Externally – it enhances the product or service in the market, or at least

avoids customer complaints.

Internally – it brings other benefits to the operation.

It prevents late delivery slowing down throughput speed.

It prevents lateness causing disruption and wasted time and effort,

therefore saving cost.

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Flexibility – what does it mean?

Flexibility has several distinct meanings but is always

associated with an operation’s ability it change.
Change what?

 The products and services it brings to the market –

Product/service flexibility.
 The mix of products and services it produces at any one
time – Mix flexibility.

 The volume of products and services it produces – Volume

flexibility.
 The delivery time of its products and services – Delivery
flexibility.

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What does Flexibility mean in… (4 of 4)

… a supermarket?

The introduction of new goods.

A wide range of goods stocked.

The ability to adjust the number of customers served.

The ability to get out-of-stock items.

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What does Cost mean in… (1 of 4)

… a hospital ?

Technology and
Bought-in materials facilities costs
and services

Staff costs

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What does Cost mean in… (2 of 4)

… an automobile plant?

Technology and
Bought-in facilities costs
materials and
services

Staff costs

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What does Cost mean in… (3 of 4)

… a bus company?

Bought-in materials Technology and

and services facilities costs

Staff costs

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What does
What doesCost
Costmean
meanin………
in… (4 of 4)

…. a supermarket?
Technology and
facilities costs
Bought-in
materials and
services

Staff costs

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External and internal benefits of performance
objectives

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Polar diagrams

Polar diagrams are used to indicate the relative

importance of each performance objective to an operation
or process.

They can also be used to indicate the difference between

different products and services produced by an operation
or process. Cost

Speed Dependa
bility

Quality Flexibility

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Polar diagrams for a taxi service versus a bus service

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Polar diagrams for police performance

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Operations management
8th edition

Chapter 3
Operations
strategy

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Slack et al.’s model of operations management

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 Key questions

In Chapter 3 – Operations strategy – Slack et al. identify the following key

questions…

 What is strategy and what is operations strategy?

 What is the difference between a ‘top-down’ and a ‘bottom-up’ view of
operations strategy?
 What is the difference between a ‘market requirements’ and ‘operations
resources’ view of operations strategy?
 How can operations strategy form the basis for operations improvement?
 How can an operations strategy be formulated? The process of operations
strategy
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 What is strategy?

 Setting broad objectives that direct an enterprise towards its overall goal.

 Planning the path (in general rather than specific terms) that will achieve these
goals.

 Stressing long-term rather than short-term objectives.

 Dealing with the total picture rather than stressing individual activities.

 Being detached from, and above, the confusion and distractions of day-to-day
activities.

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Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved
 Strategic decisions

Strategic decisions are those decisions which are

widespread in their effect on the organization to which the

strategy refers, define the position of the organization

relative to its environment and move the organization

closer to its long-term goals.

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 ‘Operations’ is not the same as ‘operational’

‘Operations’ are the resources that create products and services.

‘Operational’ is the opposite of strategic, meaning day-to-day and detailed.

So, one can examine both the operational and the strategic aspects of
operations.

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The strategic role of the operations function

The three key

Operations contribution
attributes
of operations strategy

Implementing Be dependable
Operationalize strategy
Explain practicalities

Supporting Be appropriate
Understand strategy
Contribute to decisions

Driving Be innovative
Provide foundation of strategy
Develop long-term capabilities

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The 4 stage model of operations contribution

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Figure 3.3
The four perspectives on operations strategy

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The strategy hierarchy
Key strategic Influences on
decisions decision making
What business to be in? Economic environment
Corporate What to acquire? Social environment
strategy What to divest? Political environment
How to allocate cash? Company values and ethics

What is the mission? Customer/market dynamics

Business What are the strategic Competitor activity
objectives of the firm? Core technology dynamics
strategy
How to compete? Financial constraints

How to contribute to the Skills of function’s staff

Functional strategic objectives? Current technology
strategy How to manage the Recent performance of the
function’s resources? function

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Top-down and bottom-up perspectives on operations strategy can
reinforce each other

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Different competitive factors and performance objectives
Competitive factors Performance objectives
If the customers value these ... Then, the operations will need to
excel at these ...
Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and Flexibility (products/services)

services
Wide range of products and Flexibility (mix)
services
The ability to change the timing Flexibility (volume and/or
or quantity of products and delivery)
services

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The effects of the product/service life cycle

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Some typical structural and infrastructural operations strategy
decisions

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In operations, improvement should achieve ‘fit’ between market requirements
and operations performance, but deviation from the line of ‘fit’ between market requirements and
operations performance can expose the operation to risk
(1 of 2)

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In operations improvement should achieve ‘fit’ between market requirements and operations performance,
but deviation from the line of ‘fit’ between market requirements and operations performance can expose
the operation to risk
(2 of 2)

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Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved
Nine-point performance scale
For this product/service is achieved performance …

Better than 1 - Consistently considerably better than our nearest competitor

competitors
2 - Consistently clearly better than our nearest competitor
3 - Consistently marginally better than our nearest competitor

Same as 4 - Often marginally better than most competitors

competitors 5 - About the same as most competitors
6 - Often close to main competitors

Worse than 7 - Usually marginally worse than main competitors

competitors 8 - Usually worse than most competitors
9 - Consistently worse than most competitors

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The importance–performance matrix

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Strategic resources and sustainable competitive advantage

Operations resources can give sustainable competitive

advantage if they are…

 Scarce

 Not very mobile

 Difficult to imitate

 Difficult to substitute for

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Figure 3.19 The stages of the process of operations strategy

the way that strategy is operationalized or executed.

the process of clarifying the various objectives and Three issues are often mentioned by strategy
decisions that make up the strategy, and the links practitioners as being important in achieving
between them. This should produce strategies that are successful implementation: the clarity of the
comprehensive, coherent, provide correspondence strategy, the nature of the leadership provided by
and prioritize the most critical activities or decisions top management, and effective project
management. .

involves the evaluation of the results from involves tracking ongoing performance and
monitoring the implementation so that activities, diagnosing data to make sure that the
plans and performance can be assessed with the changes are proceeding as planned and
intention of correcting future action if that is providing early indications of any deviation
required. from the plan.

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The challenge of operations strategy formulation (1 of 2)

An operations strategy should pass the following

questions…

Is it comprehensive?

Is it coherent?

Does it correspond with strategic objectives?

Does it identify critical issues?

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The challenge of operations strategy formulation (2 of 2)

An operations strategy should pass the following

questions…

Is it comprehensive?

Is it coherent?

Does it correspond with strategic objectives?

Does it identify critical issues?

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Managing Operations & Supply Chain Management

End of Topic One

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