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Q1. Do most of the principles, tools and techniques of Operations Management apply to both manufacturing and service sectors? Justify with examples.

Manufacturing & Service are the major economic activities in any country. In India, manufacturing and services together constitute nearly 75% of the GDP. In recent years, growth in GDP has been primarily due to the growth in these sectors of the economy. Therefore, managing manufacturing and service operations are important economic activities.
Utilising appropriate methods for planning and control of Operations in manufacturing and service organizations can result in significant productivity improvements and cost savings. It can also positively influence the overall health of the economy. „Operations Management is a discipline that focuses on this aspect Operations Management is an exciting and vital field, especially in the new millennium that we have entered. Operations have become increasingly competitive on a global basis. Therefore, it becomes necessary for students of MBA courses to understand the field of „operations – an essential function in every business.
The importance of Operations Management – both for organizations and for society – should be fairly obvious: the consumption of goods & services is an integral part of our society. Operations management is responsible for creating those goods and services.
Organizations exist primarily to provide services or create goods. Hence, Operations is the core function of an organization. Furthermore, the operations function is responsible for a major portion of the assets in most organizations.
Operations Management, as a field, deals with the production of Goods & Services. The abundant variety and types of Goods & Services that we see everyday are produced under the supervision of operations managers. A modern industrialized society cannot exist without effective management of „operations.
Operations managers have important positions in every company. The Plant Manager, Production Manager, Inventory Control Manager, Quality Manager and Line Supervisors – are all operations managers. This group of managers, (plus a few more factory managers), is collectively responsible for producing the supply of products in a manufacturing business. We need to include in this group, those managers at the corporate level (e.g. Vice President) who are overall in charge or are holding staff functions related to operations.
Wealth is created in the global economy through excellent operations management, when the value of outputs in goods & services exceeds the cost of the inputs used. Wealth can only be created by manufacturing and service operations that add more value than the costs of the inputs they use. The wealth created is reflected in the standard of living of the people, and is a function of constantly increasing productivity.
Raising productivity of operations, - the ratio of output to input, - is therefore, the primary basis for creating wealth. Thus, in the global economy, a company or a country cannot prosper in the long run unless it has higher productivity than its domestic and foreign competitors.
The primary task of Operations Manager, therefore, is one of the wealth creators.
Operations should lead the way in enhancing our ability to create wealth, improve productivity, and raise the standard of living for all people. This is the challenge for the coming years.
In the early days of manufacturing, goods were produced using craft production: highly skilled workers using simple, flexible tools produced goods according to customer specifications.
Craft production was slow & costly. And when parts failed, the replacements also had to be custom made, which was again slow & costly. Also, production costs did not decrease as volume increased; i.e. there were no „Economies of Scale, which might have provided incentives for companies to expand. Instead, many companies emerged, each with its own set of standards.
A major change occurred that gave the industrial revolution a boost: the development of „standard gauging systems. This greatly reduced the need for custom-made goods.
Factories began to spring up and grow rapidly, providing jobs for countless people. Despite the major changes that were taking place, management theory and practice had not progressed much from early days. What was needed was an enlightened and more systematic approach to management.

The scientific-management era brought widespread changes to the management of factories. The movement was spearheaded by the efficiency engineer and inventor Frederick W. Taylor, who is often referred to as “the father of scientific management”.
Taylor’s methods emphasized maximizing output. They were not always popular with workers as the latter felt they were exploited. Eventual, the public outcry reached the halls of congress, and hearings were held on the matter. In 1911, Taylors classic book,

The Principles of Scientific Management,was published; and the publicity from the hearings actually helped scientific management principles to achieve wide acceptance in the industry.
The function of an operating system is a reflection of the purpose it serves for its customer, i.e. the utility of its output to the customer. Four principal functions can be identified:
Manufacture, in which, the principal common characteristic is that something is physically created, i.e. the output consists of goods which differ physically – in form or content – from those materials which form the inputs to the system.
Manufacture, therefore, requires some physical transformation, or a change in „form utility of resources.
Service, in which the principal characteristic is the treatment or accommodation of something or someone. There is primarily a change in state utility of a resource. Unlike in supply systems, the state or condition of physical outputs will differ from inputs by virtue of have been treated in some way.
The service sector encompasses a wide spectrum of activities in every country. The growth of the service sector in India in the last five years has been very significant.
Between the years 1998 to 2004: the GDP growth of services of Trade, Hotels, Transport & Communication have consistently risen year after year at rates ranging between 6.8% and 11.8%; the corresponding growth of GDP in Community, Social & Personal Services have ranged between 3.9% and 12.2%; Financial Services have recorded GDP growth ranging between 3.5% and 10.6%; The GDP growth of overall services have ranged between 5.5% and 10.1%.
Although services are often classified separately from manufacturing in a macroeconomic sense, from the perspective of operations management, the separation is artificial. From the operations management perspective, the notion of a „pure product
and „pure service is just two ends of a spectrum. In reality, a vast majority of operations share a continuum of services and products. Therefore, most of the principles and tools and techniques of operations management apply to both these sectors.


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