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Unit 1: Operations Management Basics

Some important developments during this period were to move towards an interdisciplinary Notes
research. There was also an explicit recognition of businesses as decentralized entities of control
that provided local incentives to its employees. This relationship altered the criteria for analysis.
There was re-emergence of economic equilibrium and the sole-owner optimality became the
focal criteria in the new approach.
Operations Management underwent three key shifts in emphasis:
 From cost and efficiency to value creation.
 From mass production to agility and customization.
 From functional specialization to a systems approach to achieving high performance.
Figure 1.1 shows the way Operations Management themes have been changing over the last
four decades.

Self Assessment

Fill in the blanks:
1. Before World War II the focus of ‘scientific management’ was based on the ……………… in
the manufacturing sector.
2. The concept of Scientific Management led to the development of ……………… study.
3. The Toyota production system is now being implemented in many western companies,
usually under the names of ……………… or World Class Manufacturing program.

1.2 Defining Operations Management

Productive systems are those that convert or transform resource inputs into useful goods and
services as outputs. Such productive systems are generally referred to as Operations systems.
Operations Management, often described as Production and Operations Management (POM),
relates to the management of such systems. Of the many developments taking place in the
discipline in the recent past, the most radical is perhaps the concept of what the discipline
represents. Up to the 1970s, Operations Management was considered as a ‘centre’ system with its
basic focus on ‘cost reduction’. Since the 1990s, it has been increasingly recognized as a ‘basis’ for
‘value creation’ within the organization.
Both these views on Operations Management co-exist today. In smaller organizations where the
competition is price sensitive, markets are small and the customer needs are well defined, the
focus is on the cost reduction aspect of Operations Management. However, as organizations
grow, the parameters of competition increase, market logistics become more complex and
customers become more demanding, the focus of Operations Management as a ‘value creation’
function, provides greater rewards.

1.2.1 Modern vs. Traditional Approach

There are, therefore, two ways – traditional and modern – in which Operations Management is
viewed:

1. The traditional view perceives Operations Management as a system that is involved with
the manufacture and production of goods and services.
2. The more modern view perceives Operations Management as a system designed to deliver
value.
Let us discuss these two perspectives in greater detail.

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