chap001

Introduction to Operations

Management

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

You should be able to:1. Define the term operations management2. Identify the three major functional areas of organizations and

describe how they interrelate3. Identify similarities and differences between production and

service operations4. Describe the operations function and the nature of the operations

manager’s job5. Summarize the two major aspects of process management6. Explain the key aspects of operations management decision

making7. Briefly describe the historical evolution of operations management8. Characterize current trends in business that impact operations

management

1-2Instructor Slides

What is operations?The part of a business organization that is

responsible for producing goods or servicesHow can we define operations

management?The management of systems or processes that

create goods and/or provide services

Instructor Slides 1-3

Goods are physical items that include raw materials, parts, subassemblies, and final products.

•Automobile•Computer•Oven•Shampoo

Services are activities that provide some combination of time, location, form or psychological value.

•Air travel•Education•Haircut•Legal counsel


Instructor Slides

Suppliers’suppliers

Directsuppliers

Producer DistributorFinal

Customers

Supply Chain – a sequence of activities and organizations involved in producing and delivering a good or service

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Operations FinanceMarketing

Organization


Inputs•Land•Labor•Capital•Information

Outputs•Goods•Services

Transformation/Conversion

Process

Control

Measurementand Feedback



Value-Added

Feedback = measurements taken at various points in the transformation process

Control = The comparison of feedback against previously established standards to determine if corrective action is needed.


Automobile Assembly, Steelmaking

Products are typically neither purely service- or purely goods-based.

Goods Services

Home Remodeling, Retail Sales

Computer Repair, Restaurant Meal

Songwriting, Software Development

Surgery, Teaching


Tangible Act-Oriented

Goods

Services


Can you certainly recognize whether a firm is producing goods or services?

1. Degree of customer contact2. Uniformity of input3. Labor content of jobs4. Uniformity of output5. Measurement of productivity6. Production and delivery7. Quality assurance8. Amount of inventory9. Evaluation of work10. Ability to patent design


1. Jobs in services are often less structured than in manufacturing

2. Customer contact is generally much higher in services compared to manufacturing

3. In many services, worker skill levels are low compared to those of manufacturing employees

4. Services are adding many new workers in low-skill, entry-level positions

5. Employee turnover is high in services, especially in low-skill jobs

6. Input variability tends to be higher in many service environments than in manufacturing

7. Service performance can be adversely affected by many factors outside of the manager’s control (e.g., employee and customer attitudes)


Process - one or more actions that transform inputs into outputs


Instructor Slides

Operations & Supply Chains Sales & Marketing

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Variations can be disruptive to operations and supply chain processes. They may result in additional costs, delays and shortages, poor quality, and inefficient work systems.


Instructor Slides

The operations function includes many interrelated activities such as:

Forecasting Capacity planning Facilities and layout Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more . . .

The scope of operations management ranges across the organization.

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Instructor Slides

The Operations Function consists of all activities directly related to producing goods or providing services.

A primary function of the operations manager is to guide the system by decision making.

System Design DecisionsSystem Operation Decisions

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Instructor Slides

• System Design– Capacity– Facility location– Facility layout– Product and service planning– Acquisition and placement of equipment

• These are typically strategic decisions that• usually require long-term commitment of resources• determine parameters of system operation

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Instructor Slides

• System Operation• These are generally tactical and operational decisions

– Management of personnel– Inventory management and control– Scheduling– Project management– Quality assurance

• Operations managers spend more time on system operation decision than any other decision area

• They still have a vital stake in system design

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Every aspect of business affects or is affected by operations

Many service jobs are closely related to operations Financial services Marketing services Accounting services Information services

There is a significant amount of interaction and collaboration amongst the functional areas

It provides an excellent vehicle for understanding the world in which we live


Instructor Slides

Most operations decisions involve many alternatives that can have quite different impacts on costs or profits

Typical operations decisions include: What: What resources are needed, and in what amounts? When: When will each resource be needed? When should the

work be scheduled? When should materials and other supplies be ordered?

Where: Where will the work be done? How: How will he product or service be designed? How will the

work be done? How will resources be allocated? Who: Who will do the work?

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Instructor Slides

Modeling is a key tool used by all decision makersModel - an abstraction of reality; a simplification of

something. Common features of models:

They are simplifications of real-life phenomenaThey omit unimportant details of the real-life systems

they mimic so that attention can be focused on the most important aspects of the real-life system

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Instructor Slides

Types of Models:Physical Models

Look like their real-life counterpartsSchematic Models

Look less like their real-life counterparts than physical models

Mathematical ModelsDo not look at all like their real-life counterparts

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Instructor Slides

1. Models are generally easier to use and less expensive than dealing with the real system

2. Require users to organize and sometimes quantify information

3. Increase understanding of the problem

4. Enable managers to analyze “What if?” questions

5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem

6. Enable users to bring the power of mathematics to bear on a problem.

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Instructor Slides

A decision making approach that frequently seeks to obtain a mathematically optimal solutionLinear programmingQueuing techniquesInventory modelsProject modelsForecasting techniquesStatistical models

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System - a set of interrelated parts that must work together The business organization is a system composed of subsystems

marketing subsystemoperations subsystemfinance subsystem

The systems approach Emphasizes interrelationships among subsystems Main theme is that the whole is greater than the sum of its parts The output and objectives of the organization take precedence

over those of any one subsystem


Industrial RevolutionScientific ManagementHuman Relations MovementDecision Models and Management ScienceInfluence of Japanese Manufacturers


Pre-Industrial Revolution Craft production - System in which highly skilled workers

use simple, flexible tools to produce small quantities of customized goods

Some key elements of the industrial revolution Began in England in the 1770s Division of labor - Adam Smith, 1776 Application of the “rotative” steam engine, 1780s Cotton Gin and Interchangeable parts - Eli Whitney, 1792

Management theory and practice did not advance appreciably during this period


Movement was led by efficiency engineer, Frederick Winslow Taylor Believed in a “science of management” based on

observation, measurement, analysis and improvement of work methods, and economic incentives

Management is responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperate between management and workers, and separating management activities from work activities

Emphasis was on maximizing output


Frank Gilbreth - father of motion studiesHenry Gantt - developed the Gantt chart

scheduling system and recognized the value of non-monetary rewards for motivating employees

Harrington Emerson - applied Taylor’s ideas to organization structure

Henry Ford - employed scientific management techniques to his factories

Moving assembly lineMass production


The human relations movement emphasized the importance of the human element in job design Lillian Gilbreth Elton Mayo – Hawthorne studies on worker

motivation, 1930 Abraham Maslow – motivation theory, 1940s;

hierarchy of needs, 1954 Frederick Hertzberg – Two Factor Theory, 1959 Douglas McGregor – Theory X and Theory Y, 1960s William Ouchi – Theory Z, 1981


F.W. Harris – mathematical model for inventory management, 1915

Dodge, Romig, and Shewart – statistical procedures for sampling and quality control, 1930s

Tippett – statistical sampling theory, 1935 Operations Research (OR) Groups – OR applications in

warfare George Dantzig – linear programming, 1947


Refined and developed management practices that increased productivity Credited with fueling the “quality revolution Just-in-Time production


Economic conditionsInnovatingQuality problemsRisk managementCompeting in a global economy


SustainabilityUsing resources in ways that do not harm

ecological systems that support human existenceSustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

All areas of business will be affectedProduct and service designConsumer education programsDisaster preparation and responseSupply chain waste managementOutsourcing decisions


Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing

workersClosing facilitiesWorkers rights

Ethical issues arise in many aspects of operations management:


In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems:Oscillating inventory levelsInventory stockoutsLate deliveriesQuality problems


1. The need to improve operations2. Increasing levels of outsourcing3. Increasing transportation costs4. Competitive pressures5. Increasing globalization6. Increasing importance of e-business7. The complexity of supply chains8. The need to manage inventories


Customers – what products/services do customers want Forecasting – predicting timing and volume of customer demand Design – incorporating customer wants, manufacturability, and

time to market Capacity planning – matching supply and demand Processing – controlling quality, scheduling work Inventory – meeting demand requirements while managing costs Purchasing – evaluating potential suppliers, supporting the

needs of operations on purchased goods and services Suppliers – monitoring supplier quality, on-time delivery, and

flexibility; maintaining supplier relations Location – determining the location of facilities Logistics – deciding how to best move information and materials


chap001

Business

design instructor slides

service operations

outputs instructor slides

teaching instructor

operations function

impact operations management

term operations management

operations managers