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Unit 1: Operations Management Basics

Consider the Consumer Durables Sector in India: during the last twelve months, the market Notes
leaders have given a lead by lowering prices by 25-40 per cent on almost their entire product
range. The decline in prices is attributed to substantial value engineering and technology
improvement. This in turn has resulted in a 16-18 per cent increase in consumer demand for the
industry. Such dramatic changes are also seen in other technology products.
On the other hand, during the same period in the FMCG segment, most leading companies have
reported appreciable growth in profits despite the reductions in sale and sagging top-lines.
They have managed to effectively protect prices by squeezing costs through better sourcing,
better supply chain and by reducing overhead costs. The average profit growth has been in the
region of 10 per cent while average sales have reduced by 5 per cent.

The Value Chain Model

In the overall execution of the core processes, Operations Management plays an exceedingly
important role. Operations Management processes are designed to deliver value and contribute
to the customer satisfaction process in two significant ways:
 Operations Management assists in the organization’s product innovation process to design
and develop products that can satisfy the customer’s functional need with the desired level
of design quality and cost.

 Product Design determines product specifications to meet customer needs; Process
Development subscribes the production methods necessary to make the products.
These two functions have to work together, for innovation and systematization go hand in
hand. It is only possible with tight integration between these two functions that more new
products can be launched faster. Shrinking product lifecycles makes this an important requirement,
especially for fast clock-speed industries.
Operations Management designs and manages the value chain for manufacturing goods and
delivering services, i.e., the process and supply chain needed to create, deliver, and service the
products sold. It is in addition, involved in designing and managing processes that support the
value chain—such as purchasing and materials management, storage and transportation, customer
support, and work systems.

Did u know? Initiatives such as simultaneous engineering and early supplier involvement
in the product design process elevate the role of operations in the product and service
concept design process.
Its performance metrics in delivering value in controlling and improving the value chain and
support processes to achieve and sustain high levels of business and organizational performance
can be judged on its capability to:
 Deliver a product that measures up to design specifications,
 Be flexible enough to offer products to customers depending on how, when, and where
they want it, and
 Do the above at an acceptable cost.
Operations Management is no longer merely something that has to “get done” in order to
proceed with business as usual. It successfully helps organizations to squeeze out the waste, and
to focus on how to differentiate from competitors in meaningful ways. Where Operations

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