ismt 161: introduction to operations management1 production and operations management chapte r 1
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ISMT 161: Introduction to Operations Management
1
Production and OperationsManagement
CHAPTER
1
ISMT 161: Introduction to Operations Management
2
Operations Management
F in an ce P rod u c tion /O p era tion s M arke tin g
O rg an iza tion
Operations function consists of all activities directly related to producing goods or providing services.
ISMT 161: Introduction to Operations Management
3
Business Operations Overlap
Marketing
Production/ Operations
Finance
ISMT 161: Introduction to Operations Management
4
A supply chain Management Perspective
Operations
Management and coordinate
- Serving the customers and making profit
Operations
DistributionSupplies Demand
Cus
tom
ers
Flows in both directions
Information flow: demand data, inventory, etc.
Material flow: moving of goods, rework, recycling, etc
Financial flow: cash receivable, consignment contracts, etc.
ISMT 161: Introduction to Operations Management
5
Types of Operations
Operations ExamplesGoods Producing Farming, mining, construction,
manufacturing, power generationStorage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,hotels, airlines
Exchange Retailing, wholesaling, banking,renting, leasing, library, loans
Entertainment Films, radio and television,concerts, recording
Communication Newspapers, radio and televisionnewscasts, telephone, satellites
ISMT 161: Introduction to Operations Management
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Value-Added
The difference between the cost of inputs and the value or price of outputs.
Inputs Land Labor Capital
Transformation/Conversionprocess
Outputs Goods Services
Control
Feedback
FeedbackFeedback
Value added
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Food Processor
I n p u t s P r o c e s s i n g O u t p u t sR a w V e g e t a b l e s C l e a n i n g C a n n e d v e g e t a b l e sM e t a l S h e e t s M a k i n g c a n sW a t e r C u t t i n gE n e r g y C o o k i n gL a b o r P a c k i n gB u i l d i n g L a b e l i n gE q u i p m e n t
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Hospital Process
Inputs Processing OutputsDoctors, nurses Examination Healthy patientsHospital SurgeryMedical Supplies MonitoringEquipment MedicationLaboratories Therapy
ISMT 161: Introduction to Operations Management
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Examples
Many of the idea originated from manufacturing (why?)
The line between service and manufacturing is blurring
The methodology and practice now start to move to the service industry (why?)
Can you think of any Operations Management ideas in the ancient Chinese history?
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Decision Making
System Design (long term) capacity location arrangement of departments product and service planning acquisition and placement of equipment
ISMT 161: Introduction to Operations Management
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Decision Making
System operation (short term) personnel inventory scheduling project management quality assurance
ISMT 161: Introduction to Operations Management
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Major Characteristics of Production Systems
Degree of standardizationType of operation
project job shop repetitive production continuous processing
ISMT 161: Introduction to Operations Management
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Manufacturing or Service?
Tangible Act
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Key DifferencesCustomer contactUniformity of inputLabor contentUniformity of outputMeasurement of productivityQuality assurance
These differences are beginning to fadein many cases
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Manufacturing vs. ServiceC h a r a c t e r i s t i c
O u t p u t
C u s t o m e r c o n t a c t
U n i f o r m i t y o f i n p u t
L a b o r c o n t e n t
U n i f o r m i t y o f o u t p u t
M e a s u r e m e n t o f p r o d u c t i v i t y
O p p o r t u n i t y t o c o r r e c t q u a l i t yp r o b l e m s b e f o r e d e l i v e r y t oc u s t o m e r
M a n u f a c t u r i n g
T a n g i b l e
L o w
H i g h
L o w
H i g h
E a s y
H i g h
S e r v i c e
I n t a n g i b l e
H i g h
L o w
H i g h
L o w
D i f f i c u l t
L o w
H i g h
ISMT 161: Introduction to Operations Management
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Responsibilities of Operations Managers
Planning Capacity Location Products and services Make or buy Layout Projects Scheduling
Controlling Inventory Quality
Organizing Degree of centralization Subcontracting
Staffing Hiring/laying off Use of Overtime
Directing Incentive plans Issuance of work orders Job assignments
ISMT 161: Introduction to Operations Management
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Models
A model is an abstraction of reality. Physical Schematic Mathematical
What are the pros and cons of models?
Tradeoffs
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Systems Approach
“The whole is greater than the sum of the parts.”
Suboptimization
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Quantitative Approaches
Linear programmingQueuing TechniquesInventory modelsProject modelsStatistical models
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Pareto Phenomenon
A vital few things are important for reaching an objective or solving a problem.
80/20 Rule - 80% of problems are caused by 20% of the activities.
How do we identify the vital few?
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Recent Trends
Global competition
Operations strategy
Total quality management (TQM)
Flexibility
Time reduction
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Recent Trends (Continued)
Technology
Worker involvement
Reengineering
Environmental issues
Service