Management Theories and Practices Quiz

Operations Management Overview

• Operations management is the business function responsible for planning, coordinating, and controlling resources needed to produce a company's goods and services.
• It's a core function in all organizations, both large and small, for-profit and not-for-profit, and in manufacturing or service industries.
• Operations management involves transforming inputs (resources like human capital, facilities, technology, materials, and information) into outputs (finished goods and services).

Learning Objectives

• Define operations management
• Describe the difference between manufacturing and service organizations.
• Outline the decisions that operations managers make.
• Identify major historical developments in operations management.
• Identify current trends in operations management.
• Describe the flow of information between operations management and other business functions.

Operations Management Characteristics

• A management function
• A core function of any organization
• Applies to all organizations (small or large, manufacturing or service, profit or non-profit)

Typical Organization Chart

• The typical organization chart shows three major business functions:
  • Marketing (managing customer demands, generating sales for goods and services)
  • Operations (managing people, equipment, technology, materials, information to produce goods and/or services)
  • Finance (managing cash flow, current assets, and capital investments)

Role of Operations Management (OM)

• OM transforms inputs to outputs.
• Inputs include human resources, facilities, processes, materials, technology, and information.
• Outputs are finished goods and services.

OM's Transformation Process

• Inputs (human resources, facilities, processes, technologies, materials) are transformed via the transformation process.
• Outputs are goods and services.
• Customer feedback is also a significant aspect of the transformation process in that it provides performance information used to improve operational effectiveness and thus enhance customer service.

Transformation Processes: Value Added and Efficiency

• Value added is the net increase in value between the output product value and the input material value.
• A greater value added, implies a more productive business.
• Efficiency means performing activities well and at the lowest possible cost.

Service Organizations vs. Manufacturers

• Services:
  • Intangible product
  • Product cannot be inventoried
  • High customer contact
  • Short response time
  • Labor intensive
• Manufacturers:
  • Physical, tangible product
  • Product is inventoried
  • Low customer contact
  • Longer response time
  • Capital intensive

Service vs. Manufacturing

• Manufacturing can provide services.
• Services can provide tangible goods.
• Organizations can be a blend of service, manufacturing, or quasi-manufacturing organizations.
• Quasi-manufacturing organizations exhibit low customer contact and are capital intensive.

Growth of the Service Sector

• A growing trend in employment globally, service sector positions are increasing at a more rapid pace than goods producing sector positions.

OM Decisions

• All organizations make decisions using a similar path.
• Strategic decisions lead to tactical decisions.
• Tactical and strategic decisions must align.

Strategic and Tactical Decisions Relationship

• Strategic decisions
  • Broad in scope
  • Long-term in nature
  • All-encompassing (e.g., What unique features make the product competitive?)
• Tactical decisions
  • Narrow in scope
  • Short-term in nature
  • Small-group of issues (e.g., Who will work the second shift tomorrow?)

Historical Development of OM (1700s-1980s)

• Industrial Revolution: Using machine power instead of human power.
• Scientific Management (Early 1900s): Analyzing, measuring, and developing work design; moving assembly lines and mass production.
• Human Relations Movement (1930s-1960s): Considering worker motivation and job satisfaction.
• Management Science (1940s-1960s): Developing quantitative techniques for solving operational problems.
• Computer Age (1960s): Enabling widespread use of data processing, and quantitative procedures.
• Environmental Issues (1970s): Waste reduction, need for recycling, and product reuse.
• Just-in-time systems (JIT) (1980s): Designed for high-volume production with minimum inventory to eliminate causes of production defects.
• Total Quality Management (TQM)(1980s): Quality as the responsibility of everyone in the organization.

Historical Development of OM (1980s-Present)

• Reengineering (1980s): Redesigning company processes for greater efficiency and cost reduction.
• Global competition (1980s) and Global Marketplace (1990s-Present): To compete in the global market
• Flexibility (1990s): Offering varied product choices.
• Time-based competition (1990s): Emphasis on speed of delivery.
• Supply chain management (SCM)(1990s-Present): Managing the flow of materials from suppliers to customers in a cost-effective manner.
• Electronic commerce (2000s): Conduct business online globally.
• Outsourcing and Flattening (2000s): Obtaining external services.
• Big Data Analytics (2010s-Present): Applying maths and statistics to large, structured & unstructured business information for insights.

Scientific Management

• Promoted by Frederick W. Taylor, focusing on improving worker output.
• Popularized by Henry Ford, including moving assembly lines and mass production.

Human Relations Movement

• Hawthorne studies highlighted the importance of worker needs.
• Worker productivity was affected by more than just wages.

Management Science

• Focused on using quantitative techniques to solve operational problems.
• Linear programming is an example.

Just-in-Time (JIT)

• An all-inclusive organizational philosophy aiming to make high volume products efficiently.

Total Quality Management (TQM)

• Focuses on improving product quality by getting defects out of the overall production process.
• ISO 9000 standards are also part of promoting quality.

Business Process Reengineering, Flexibility, and Time-based competition

• Reengineering: redesigning company processes for more efficiency.
• Flexibility: strategy to offer more product choices to customers.
• Mass customization: ability to customize goods/services in high volume.
• Time-based competition : developing and delivering newer products faster than competitors.

Supply Chain Management (SCM)

• Managing the flow of materials from suppliers to customers to reduce costs and enhance responsiveness to customers.

Global Marketplace

• The trend in businesses focusing on customers, suppliers, and competitors from a global perspective.
• Operations management decisions should take this into account concerning tailoring products for different customer needs, locating facilities, managing suppliers, and conforming to local government standards.

Sustainability and Green Operations

• Conscientious efforts to reduce waste, recycle, and reuse products and parts for environmental responsibility.
• ISO 14000 provides guidelines for environmental sustainability.

Electronic Commerce

• Business-to-business (B2B)
• Business-to-customer (B2C)
• Customer-to-customer (C2C)

Outsourcing and Flattening of the World

• Obtaining goods/services from outside organizations.
• Global trade makes it easier to outsource work to different parts of the world.

Big Data Analytics

• Techniques using mathematics and statistics applied to lots of structured and unstructured business data, generating insights which are unprecedented.
• Examples: point-of-sale data, RFID, GPS data, Twitter feeds, Facebook, calls centers, and customer blogs.

Current Trends in Operations Management

• Better quality, faster speed, and lower costs.
• Lean system concepts to enhance operation effectiveness.
• Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems for managing information better.
• Increased cross-functional decision-making

Information Flow Across the Organization

• Operations is crucial to marketing and financial planning.
• All business functions need information from Operations Management to function efficiently.

OM Across the Organization

• Marketing cannot meet customer needs if Operations Management does not understand the production processes.
• Finance cannot assess capital investments if Operations Management does not understand its needs.
• Information systems are key to facilitating communication throughout the organization between Operations Management, Marketing, and Finance.
• Human Resources (HR) needs to understand job requirements and worker skills from operations management to effectively execute human related functions.
• Accounting needs inventory and capacity information, and labor information from operations management to keep financial records updated.