FHF

Operations ManagementOperations ManagementOperations ManagementOperations Management

• Historically called “production” or “manufacturing” where the focus was on methods to operate a factory

• “Operations” view the operations functions as a whole rather than just inputs and outputs

• The planning and designing of the processes that transform resources into finished products; managing the transformation process; ensuring high quality of finished goods.

8-3

FHF

Operations ManagementOperations ManagementOperations ManagementOperations Management

• Manufacturing – activities and processes used in making tangible products (also called production)

• Production – activities and processes used in making tangible products (also called manufacturing)

• Operations – the activities and processes used in making both tangible and intangible products

8-3

FHF

Transformation Processes of Transformation Processes of Operations ManagementOperations Management

Transformation Processes of Transformation Processes of Operations ManagementOperations Management

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FHF

Services Are...Services Are...Services Are...Services Are...

Generally intangible Perishable Demand can be variable Cannot be saved, stored, resold, or packaged

8-7

FHF

Service Businesses –Service Businesses –

• Airlines

• Universities

• Hotels

• Restaurants

• Nonprofit organizations

• Over 70% of all employment in developed economies; fastest growth of jobs

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FHF

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Manufacturing Service

Tangible Intangible

Uniform inputs Customized inputs

Uniform outputs Customized outputs

Less labor intensive More labor intensive

Easy to measure productivity More difficult to measure productivity (due to variations in demand, service, requirements and intangibility)

Manufacturing and Service Manufacturing and Service ComparedCompared

Manufacturing and Service Manufacturing and Service ComparedCompared

FHF

Designing Operations ProcessDesigning Operations ProcessDesigning Operations ProcessDesigning Operations Process

What is the appropriate method of transformation?

• A. Standardization – the making of identical interchangeable components or products. Faster, reduces production costs

• Televisions, Ballpoint pens, Tortilla chips etc.

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FHF

Designing Operations ProcessDesigning Operations ProcessDesigning Operations ProcessDesigning Operations Process

• B. Modular Design – creation of an item

in self-contained units that can be combined or interchanged to create different products

• Personal computers (CPU’s, motherboards, monitors), Automobiles

• C. Customization – making products

to meet a particular customer’s needs or wants

• Repair services, photocopy services, bridges, ships

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FHF

Planning FacilitiesPlanning FacilitiesPlanning FacilitiesPlanning Facilities

• Once the company knows the process it will use to create its products, then they need to decide on;

• Facility location

• Facility Layout

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FHF

FacilitFacility Locationy LocationFacilitFacility Locationy Location• High costs involved

• Permanent

Pay attention to

• Proximity to market

• Availability of raw materials, transportation, power, labor

Climatic influences

• Community characteristics

• Taxes and inducements

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FHF

FacilitFacility y LayoutLayout/Physical Location/Physical Location•Fixed-Position Layout--Project organization

– All resources needed for the product are brought to a central location.

– Unique product e.g., construction, exploration

• A company using a fixed position layout is called a project organization

•Process Layout-- Intermittent organization

– Layout is organized into departments that group related processes

– Produce products to customers’ specifications, e.g.,hospital

•Product Layout--Continuous manufacturing org

– Production is broken down into relatively simple tasks assigned to workers positioned along an assembly line.

– E.g., automobiles, TV

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FHF

Sustainability and Sustainability and ManufacturingManufacturing

Sustainability and Sustainability and ManufacturingManufacturing

Pressure has increased for manufacturing and production systems to reduce waste and improve sustainability

Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas)

Consumers prefer to purchase goods that were manufactured in an environmentally-friendly facility

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[ ]FHF

SUPPLY CHASUPPLY CHAIIN MANAGEMENTN MANAGEMENTSUPPLY CHASUPPLY CHAIIN MANAGEMENTN MANAGEMENT

Connecting and integrating all parties or members of the distribution system in order to satisfy customers

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Also called Logistics: includes all the activities involved in obtaining and managing raw materials and component parts, managing finished products, packaging them and getting them to customers.

FHF

Supply Chain Management: Supply Chain Management: PurchasingPurchasing

Supply Chain Management: Supply Chain Management: PurchasingPurchasing

Buying of all materials needed by the organizationDesired quality

Correct quantities

Lowest cost

Otherwise known as Procurement

8-19

FHF

Supply Chain Management: Supply Chain Management: InventoryInventory

Supply Chain Management: Supply Chain Management: InventoryInventory

All raw materials, components, completedor partially completed products, and pieces of equipment that a firm uses

Inventory Control• Process of determining how many supplies and

goods are needed and keeping track of quantities on hand, where each item is and who is responsible for it

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FHF

OutsourcingOutsourcingOutsourcingOutsourcing

Increasingly a part of supply chain management in operations

Outsource aspects of operations to companies that provide products more efficiently, at lower cost, greater customer satisfaction.

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FHF

Managing Managing QualityQualityManaging Managing QualityQuality

Degree to which a good or service meets the demands and requirements of customers

A critical element of operations management

Determining quality can be difficult (services)

Subjective based on consumers’ expectations and perspectives

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