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Fundamentals ofOperations Management
BUS 3 140
Mr. Jess Marino
Fall, 2007
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Agenda
Introduction
Green Sheet review and other administrative items
Additional comments on the course
Initial Lecture
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Introduction
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Marino Background
Academics
Supply Chain Experience
Graduate in Production and Operations Management
Product of CSU system (San Diego State)
Developed and presented several courses as a Management Consultant
Over 25 years as a practitioner at all levels of responsibility
Leadership in small and large organizations
Many different hourly and professional jobs
Over eight years as a Management Consultant
Certified in Production and Operations Management by the Association forOperations Management (APICS)
Exposure to many industries and organizations
Have done business in 13 countries throughout the world
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Positions Held
MachineOperator
ProductionExpediter
Mail RoomClerk
WarehouseClerk
ProductionSupervisor
BuyerProductionController
MaterialController
StockroomManager
Production ControlManager
Director of Materials
Executive Directorof Fulfillment
Director of Supply Chain Management
Director of Operations
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Have conducted Business in 13 Countries, Worldwide
UNITED STATES
CANADA
MEXICO
ENGLAND
SCOTLAND
FRANCE
HOLLAND
HONG KONG
CHINA
TAIWAN
SINGAPORE
MALAYSIA
THAILAND
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Green Sheet Review
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Student Information Sheet
NAME
MAJOR (and Emphasis)
CURRENT JOB (Company Optional)
PREVIOUS SUPPLY CHAIN JOBS / EXPEIRIENCE
OTHER
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Course Overview and Objectives
Understanding how the Operations function interrelates with other functional
organizations in a business
Understanding how an organization uses its resources, processes, data, andtechnologies to create goods and provide services to customers
Understanding how operational effectiveness can be a critical success factor indetermining an organizations Revenue, Profitability, and Shareholder return
Understanding the managerial responsibility for Operations, even whenproduction is outsourced, or done in regions far from corporate headquarters
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Student Learning Objectives for the Course
Understand how Operations is relevant to all functions of a business
Understand Operations Management and how it fits within the overallorganization strategy, objectives, and competitiveness
Develop an interest in Operations and apply that understanding,
whether in a manufacturing or service career
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Course Introduction
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Operations is a Key Element of a Supply Chain
Revenue
Utilization of Assets
(People, Plant, Equip)
Cash
Inventory
BALANCING keeping Customers completely satisfied and Resourcesoptimally utilized . against spending the least amount of Cash
and carrying the least amount of Inventory
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Scope of this Course
Customer
Demand
Production
Scheduling
Materials
Mgmt Production Shipping
Customer
Service
Forecasting
AggregatePlanning
Strategic
CapacityPlanning
Demand &SupplyMatching
Scheduling
Just In Time(JIT)
ProjectMgmt
InventoryMgmt
MRP
ERP
ProcessLayout
WorkSystemDesign
LeanOperations
Quality
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Introduction toOperations Management
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Highest Level Operations Management Process (Fig 1.2)
There is a CONVERSION that takes Information, Intelligence,Resources, and Activities and turns them into something
VALUABLE to Customers and / or Society
InputsProcess
(Transformation)Outputs
ControlFeedback
Feedback
Feedback
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
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Inputs / Process / Outputs (Table 1.1)
Land Processes
Human Cutting, drillinPhysical Labor Transporting
Intellectual Labor Teaching
Capital FarmingRaw Materials Mixing
Energy Packing
Water Copying, faxiMetals
Wood
Equipment
Machines
Inputs Transform
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
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Operations are managed for both Production and Services
Inputs Process Outputs
Raw vegetables
Metal sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned Vegetables
PRODUCTIO
N
Inputs Process Outputs
Doctors, nurses
Hospital
Medical supplies
Equipment
Laboratories
Examination
Surgery
Monitoring
Medication
Therapy
SERV
I CE
Treated Patients
Foodp
rocess in
gPlant
Hosp
ita
l
Result is
TANGIBLE OUTPUT
Result implies
an ACT
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Differences between Goods and Service (Book Table 1.3)
Characteristic
Customer contact
Uniformity of Input
Labor content
Uniformity of Output
Output* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
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Goods and Services continuum (Fig 1.3)
Goods
Automobil
Compute
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
C bi i f P d i d S i
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Combination of Production and Service
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Stage of Production ValueAdded
Value ofProduct
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
M f t i J b
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Manufacturing Jobs
U.S. Manufacturing vs. Service Employment
0
10
20
30
40
50
60
7080
90
45 50 55 60 65 70 75 80 85 90 95 00 02 05Year
Percen
t
Mfg.Service
> 70%
Greater PRODUCTIVITY allows for increased output with fewer workers Many manufacturing jobs have moved OFFSHORE to lower labor cost areas
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
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How Operations Interactswith Other Organizations
K i t ti ith S l & M k ti d ith Fi
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Key intersections with Sales & Marketing and with Finance
FINANCE & ACCOUNTING
Budgeting
Authorizing Capital spending
Authorizing major inventory buys
Cost accounting
Make vs. Buy decisions
Location planning
Managing international trade
Analyzing trade-off decisions
K i t ti ith S l & M k ti d ith Fi
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Key intersections with Sales & Marketing and with Finance
SALES & MARKETING
Forecasting Demand
Influencing demand
Committing supply
Negotiating schedules with customers
Providing competitive information
Requesting new products and services
Opening new markets
I t ti ith th F ti l O i ti
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Interaction with other Functional Organizations
O
IT
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Competitiveness, Strategy,and Productivity
Strategy Terms
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Strategy Terms
Mission
The reason for existence for an organization
Mission Statement
States the purpose of an organization
Goals
Provide detail and scope of missionStrategies
Plans for achieving organizational goals
Tactics
The methods and actions taken to accomplishstrategies
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
How terms have meaning to the business
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How terms have meaning to the business
Mission
Goals
OrganizationalStrategies
Functional Goals
FinanceStrategies
MarketingStrategies
OperationsStrategies
Tactics Tactics Tactics
Operatingprocedures
Operatingprocedures
Operatingprocedures
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Competitiveness
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Competitiveness
World Class Operations enable companies to gain aCOMPETITVE ADVANTAGE over others trying to servethe same customers and markets
The three biggest levers are:
Cost
Quality and Reliability
Assurance of Supply
How Operations impacts Competitiveness
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How Operations impacts Competitiveness
Cost
Quality
Product design
Response Time
Flexibility
Scalability
Service
Location
Factors that impact Operations Strategy
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Factors that impact Operations Strategy
Factor
PriceThe strategy is tied to where a COMPETITIVE EDGE
can be gained or maintained
Operations Strategies vary by mission of the Business (2 4)
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Operations Strategies vary by mission of the Business (2.4)
1 Product and Service design Costs, quali
2 Capacity Cost structu
3 Process selection and layout Costs, flexi
4 Work design Quality of w
5 Location Costs, visibi
6 Quality Ability to m
7 Inventory Costs, shor
Decision Area
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
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Productivity
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Productivity
Productivity is a RATIO of Inputs and Outputs
Productivity = OutputInput
Inputs and Outputs can be measured at different degrees
Output Output Output OutputLabor Machine Capital Energy
Goods or services produced
All inputs used to produce them
Partial Measures
Multifactor Measures
Total Measure
Output
Labor + Machine
Output
Labor + Capital + Energy
Additional Productivity Terms
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Additional Productivity Terms
Performance to a Standard (e.g. Time to assemble a Computer,
POs placed per hour, etc.) Emphasis is Value-Added activities
Efficiency
Per cent of time that is devoted to Value-Added activities
Utilization
Efficiency * Utilization
Productivity
The Contribution that the activity / departmentprovides to the overall mission of the business
Effectiveness
Steps for Improving Productivity
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Steps for Improving Productivity
Measure key outputs and indicators
Analyze the production system as a whole
Benchmark Best In Class processes within and across industries
Solicit ideas from everyone in the organization
Set achievable, stretch goals
Ensure executive supporrt
Measure the improvements
Publicize the improvements