Introduction to Operations Management

Introduction to Operations Management

• Operations management is the part of the business organization responsible for producing goods or services.
• It involves managing systems or processes that create goods or provide services.

Goods vs Services

• Goods: tangible products, such as cars, computers, and shampoo.
• Services: intangible activities that provide value, such as air travel, education, haircuts, and legal counsel.

Supply Chain

• Sequence of activities and organizations that produce or deliver a good or service.
• Includes suppliers, producers, distributors, and customers.

Transformational Process

• Where value is added to inputs to produce outputs (goods or services).
• Feedback loops are used to improve the process.

Goods and Services Continuum

• Many products are not purely goods or services, but a combination of both.
• Examples: automobile assembly and steelmaking (mostly goods), home remodeling (more service-oriented).

Importance of Operations Management

• Every aspect of business affects or is affected by operations.
• Service jobs are closely related to operations.
• Understanding operations and supply chain helps understand global dependencies and company successes/failures.

Functions of an Organization

• Marketing: identifies customers and brings them in.
• Operations: makes or does something.
• Finance: collects and manages money.

Supply and Demand

• Operations and supply chain management are responsible for meeting supply and demand.
• Supply must equal demand for optimal performance.

Process Variation

• Four sources of process variation: variety of goods or services, structural variation, random variation, and assignable variation.

Role of the Operations Manager

• Guide the system by making system design and system operation decisions.
• System design decisions: capacity, facility layout, product/service planning, and facility location.
• System operation decisions: managing people, inventory, and quality, and scheduling.

Decision Making

• Typical operations decisions: what, when, where, how, and who.
• Models are used to simplify complex systems and make decisions.
• Features of models: simplifications of reality, omit unimportant details, and mimic real-life systems.

Systems Approach

• A system is a set of interrelated parts that work together.
• The systems approach emphasizes the interrelationship among systems.

Historical Evolution of Operations Management

• Industrial Revolution: craft production systems.

• Scientific Management: Frederick Taylor's principles.

• Human Relations Management: focus on worker motivation and behavior.

• Decision Models and Management Science: using mathematical models to make decisions.

• Influence of Japanese Manufacturers: emphasis on quality and continuous improvement.### Industrial Revolution and Early Management Theories

• Division of labor by Adam Smith

• Rotative steam engine in the 1780s

• Cotton gin and interchangeable parts by Eli Whitney

• Industrial Revolution started in England in the 1770s

Scientific Management

• Frederick Winslow Taylor believed in a science of management based on:
  • Observation
  • Measurement
  • Analysis
  • Improvement of work methods
  • Economic incentives
• Management responsible for planning, selecting, training workers, and finding the best way to perform each job
• Cooperation between management and workers is necessary
• Emphasis on maximizing output

Human Relations Movement

• Started with Gilbreth and the application of psychology
• Hawthorne studies by Mayo on worker motivation:
  • Productivity increased with both increased and decreased lighting
  • Realized that management's attention to workers led to increased productivity
• Maslow's motivation theory: Hierarchy of Needs
• Two-factor theory and Theory X, Theory Y, and Theory Z

Management Science and Decision Models

• Mathematical models for inventory management (Harris, 1915)
• Statistical procedures for sampling and quality control (Tippett, 1935)
• Operations research groups and applications to warfare
• Linear programming (1947)

Japanese Influence on Quality and Operations

• Credited with the quality revolution
• Introduced just-in-time production
• Emphasis on quality and sustainability

Key Issues for Operations Managers

• Economic conditions: predicting and responding to economic changes
• Innovating and making new products
• Quality problems: ensuring good quality
• Managing risk
• Competing in a global economy
• Environmental concerns: sustainability and ecological systems
• Ethical issues: financial statements, worker safety, product safety, community, and worker rights

Introduction to Operations Management

• Operations management involves producing goods or services and managing systems or processes that create them.

Goods vs Services

• Goods are tangible products, such as cars, computers, and shampoo.
• Services are intangible activities that provide value, such as air travel, education, haircuts, and legal counsel.

Supply Chain

• A supply chain is a sequence of activities and organizations that produce or deliver a good or service.
• It includes suppliers, producers, distributors, and customers.

Transformational Process

• A transformational process adds value to inputs to produce outputs (goods or services).
• Feedback loops are used to improve the process.

Goods and Services Continuum

• Many products combine both goods and services.
• Examples: automobile assembly and steelmaking (mostly goods), home remodeling (more service-oriented).

Importance of Operations Management

• Every aspect of business is affected by or affects operations.
• Service jobs are closely related to operations.
• Understanding operations and supply chain helps understand global dependencies and company successes/failures.

Functions of an Organization

• Marketing identifies customers and brings them in.
• Operations makes or does something.
• Finance collects and manages money.

Supply and Demand

• Operations and supply chain management are responsible for meeting supply and demand.
• Supply must equal demand for optimal performance.

Process Variation

• There are four sources of process variation: variety of goods or services, structural variation, random variation, and assignable variation.

Role of the Operations Manager

• Guide the system by making system design and system operation decisions.
• System design decisions include capacity, facility layout, product/service planning, and facility location.
• System operation decisions include managing people, inventory, and quality, and scheduling.

Decision Making

• Typical operations decisions include what, when, where, how, and who.
• Models are used to simplify complex systems and make decisions.
• Features of models include simplifications of reality, omitting unimportant details, and mimicking real-life systems.

Systems Approach

• A system is a set of interrelated parts that work together.
• The systems approach emphasizes the interrelationship among systems.

Historical Evolution of Operations Management

• The Industrial Revolution started in England in the 1770s.
• Scientific Management emphasized observation, measurement, analysis, and improvement of work methods.
• Human Relations Management focused on worker motivation and behavior.
• Decision Models and Management Science used mathematical models to make decisions.
• Japanese manufacturers emphasized quality and continuous improvement.

Industrial Revolution and Early Management Theories

• Adam Smith introduced the concept of division of labor.
• The rotative steam engine was invented in the 1780s.
• Eli Whitney invented the cotton gin and introduced interchangeable parts.

Scientific Management

• Frederick Winslow Taylor believed in a science of management based on observation, measurement, analysis, and improvement of work methods.
• Management is responsible for planning, selecting, training workers, and finding the best way to perform each job.
• Cooperation between management and workers is necessary.
• Emphasis is on maximizing output.

Human Relations Movement

• Gilbreth applied psychology to improve work.
• Hawthorne studies by Mayo showed that productivity increased with attention from management.
• Maslow's motivation theory includes the Hierarchy of Needs.
• The two-factor theory and Theory X, Theory Y, and Theory Z were developed.

Management Science and Decision Models

• Mathematical models were developed for inventory management (Harris, 1915).
• Statistics and computer-based models improved decision-making.