Operations Management Overview

Operations Management Overview

• Operations management is the part of a business responsible for producing goods or services.
• Operations management manages systems and processes that create goods and services.
• Goods are physical items like automobiles, computers, ovens, and shampoo.
• Services provide a combination of time, location, form, or psychlogical value like air travel, education, haircuts, and legal counsel.
• A supply chain is a sequence of activities and organizations involved in producing and delivering a good or service. It includes suppliers, producers, distributors, and final customers.

The Transformation Process

• The transformation process takes inputs, such as land, labor, capital, and information, to create outputs, such as goods and services.
• A control process using measurement and feedback is used in the transformation process.
• Feedback is used to measure, at different points, and compare results to previous standards to decide if corrective action is needed.
• This transformation process creates value added to the goods or services.

Goods vs. Services Continuum

• Goods and services are seldom completely one or the other; there exists a continuum.
• Goods-service continuum displays the spectrum examples like surgery, teaching, songwriting, software development, restaurant meals, home remodeling, retail sales, and automobile and steelmaking processes.

Manufacturing vs. Service

• Degree of customer contact
• Uniformity of input
• Labor content of jobs
• Uniformity of output
• Measurement of productivity
• Production and delivery
• Quality assurance
• Amount of inventory
• Evaluation of work
• Ability to patent design

Why Study Operations

• Operations management is a crucial component of every business.
• Many service jobs depend on operations. This includes financial, marketing, accounting, and information services.
• Studying operations provides a more complete understanding of the world, global dependencies, reasons behind business success or failure, and the importance of coordinating with others.

Basic Business Functions

• A business organization is typically comprised of marketing, operations, and finance.
• These three functions overlap and support each other.

Operations and Supply Chain Career Opportunities

• Operations manager
• Supply chain manager
• Production analyst
• Schedule coordinator
• Production manager
• Industrial engineer
• Purchasing manager
• Inventory manager
• Quality manager

OM-Related Professional Societies

• APICS
• American Society for Quality (ASQ)
• Institute for Supply Management (ISM)
• Institute for Operations Research and Management Science (INFORMS)
• The Production and Operations Management Society (POMS)
• The Project Management Institute (PMI)
• Council of Supply Chain Management Professionals (CSCMP)

Process Management Categories

• Upper-management processes - govern operations within an entire organization.
• Operational processes - core processes making up a value stream.
• Supporting processes - support the core processes.

Supply & Demand

• Supply exceeding demand - wasteful, costly
• Supply less than demand - opportunity loss, customer dissatisfaction
• Supply equals demand - ideal

Process Variation Sources

• Variety of goods or services being offered - the more diverse products, the greater the output requirements.
• Structural variation in demand - predictable
• Random variation - natural variation of processes, not controlled by managers
• Assignable variation - factors can be identified, reduced, or eliminated. Variations affect cost, delay, supply chain process issues, and poor quality.

Scope of Operations Management

• Forecasting
• Capacity planning
• Facility and layout
• Scheduling
• Managing inventories
• Assuring quality
• Motivating employees
• Location decisions
• Other interrelated activities

Role of the Operations Manager

• The Operations Function includes activities related to producing goods or providing services.
• Operations managers guide a system by making decisions. Decisions focused on system design and system operation.

System Design Decisions

• Capacity
• Facility location
• Facility layout
• Product and service planning
• Acquisition and placement of equipment
• Strategic decisions requiring long-term resource commitment.
• Parameters of system operation are determined by these decisions.

System Operation Decisions

• Management of personnel
• Inventory management and control
• Scheduling
• Project management
• Quality assurance
• Tactical and operational decisions
• Operations managers spend considerable time on system operation decisions.
• Operational decisions require tactical and operational decision-making.

OM Decision Making

• Most operations decisions involve many alternatives with different profit/cost impacts.
• What (resources needed)
• When (each resource needed and scheduling)
• Where (work will be done)
• How (product/service design, work done, resource allocation)
• Who (who does the work)

General Approach to Decision Making - Models

• Modeling- an abstraction of reality, used to simplify something.
• Simplify real-life phenomena
• Omit unimportant details
• Focus on critical aspects.

Understanding Models

• What is its purpose?
• How is it used to generate results?
• How are the results interpreted and used?
• What are the model's assumptions and limitations?

Benefits of Models

• Ease of use
• Cost-effectiveness for dealing with real systems
• Organize and quantify information
• Increased understanding of problems
• Analyze what-if scenarios consistently
• Utilization of mathematical approaches
• Standardized format for analysis

Model Limitations

• Emphasize quantitative information over qualitative.
• Models may be misapplied or misinterpreted.
• Use of models does not ensure good decisions.
• Sophisticated computerized models may be put in the hands of uninformed users.

Quantitative Approaches

• A decision-making approach seeking a mathematical solution.
• Linear programming
• Queuing techniques
• Inventory models
• Project models
• Forecasting techniques
• Statistical models

Metrics & Trade-offs

• Performance metrics are used for managing and controlling operations.
• Profit
• Cost
• Quality
• Productivity
• Flexibility
• Inventories
• Schedules
• Forecast accuracy
• Trade-offs - giving up something in exchange for something else.

Systems Approach

• System- a set of interconnected parts working together.
• Emphasizes relationships between subsystems.
• Whole is greater than the sum of its parts.
• Output and objectives of the organization take precedence over subsystems.

Establishing Priorities

• Important issues receive priority over less important ones.
• Pareto Phenomenon- a few factors often account for a high % of an event's causes.
• Identify critical few factors to focus on

Historical Evolution of OM

• Industrial Revolution
• Scientific Management
• Human Relations Movement
• Decision Models and Management Science
• Influence of Japanese Manufacturers

Key Issues for OM Managers

• Economic conditions
• Innovating
• Quality problems
• Risk management
• Competing in a global economy

Environmental Concerns

• Sustainability
• Using resources to avoid harming and support human existence
• Sustainability measures often include environmental, economic, and social criteria.
• Areas affected include product and service design, consumer education, disaster preparation, supply chain waste management, and outsourcing decisions.

Ethical Issues in Operations Management

• Financial statements
• Worker safety
• Product safety
• Quality
• The environment
• Hiring and firing
• Closing facilities
• Ethical considerations in operations management.
• Workers rights

Need for Supply Chain Management

• In the past, organizations only managed their own operations and immediate suppliers.
• This led to issues like oscillating inventory levels, stock outs, late deliveries, and quality problems.

Supply Chain Issues

• Improve operations
• Increasing outsourcing
• Increasing transportation costs
• Competitive pressures
• Increasing globalization
• Increasing e-business importance
• Complexities of supply chains
• Need to manage inventories

This quiz delves into the fundamentals of operations management, focusing on processes involved in producing goods and services. It covers key concepts like the transformation process and supply chain management. Test your understanding of how inputs are transformed into outputs in a business context.