Mastering Operations Management Fundamentals

Understanding Operations Management (OM)

Definition: The design, direction, and control of processes that transform inputs into goods and services.

Why it matters: Approximately 60–80% of people and investment in many firms are concentrated in operations.

Example: In a hospital, inputs (doctors, equipment) go through a process (diagnosis/treatment) to create an output (a healed patient).

Porter’s Value Chain Model

The Concept: Breaking a firm into primary and support activities to identify where value is created and costs are managed.

• Primary Activities: Inbound logistics, operations, outbound logistics, marketing and sales, and service.
• Support Activities: Procurement, technology, human resources (HR), and firm infrastructure.

Example: Apple utilizes design (support R&D), operations (manufacturing), and marketing to command a premium price.

Order-Winners vs. Order-Qualifiers

• Qualifiers: These are the minimum capabilities required to be considered by a customer (e.g., legal safety standards, baseline quality).

• Winners: These are the specific features that make customers choose your product over others (e.g., speed, price, brand reputation).

Example: For a fast-food chain, a qualifier is food safety, while a winner might be delivery speed.

Process View and Nested Processes

The fundamental flow is Inputs → Process → Outputs. Processes can be nested, meaning a sub-process exists inside a larger one.

Example: The process "Serve Customer" includes sub-processes such as: take order → prepare food → deliver bill.

Core Operations Management Processes

• Customer relationship processes
• New product/service development
• Order fulfillment
• Supplier relationship processes

Example: Order fulfillment for an online retailer involves: receive order → pick/pack → ship → deliver.

Manufacturing Process Types: Volume vs. Variety

• Project: One-off, high customization (e.g., building a bridge).

• Jobbing: Small batches or unique items (e.g., a tailor-made dress).

• Batch: Groups of identical items (e.g., printed books).

• Line: Assembly line, high volume, low variety (e.g., cars).

• Continuous: Nonstop production (e.g., an oil refinery).

Tip: Higher volume typically leads to more automation and less flexibility.

Process Flexibility and Agility

Flexibility: The ability to handle new products, varying volumes, or a wide variety of tasks.

Agility: The capacity for fast response to market changes.

Example: A factory that can quickly switch its line setup to produce a new model is considered flexible.