Chapter 1 - Introduction to Operations Management PDF

Chapter 1 - Introduction to Operations Management Operations Management by R. Dan Reid & Nada R. Sanders 4th Edition © Wiley 2010 © Wiley 2010 1  Learning Objectives Define and explain OM Explain the role of OM in business...

Chapter 1 - Introduction to Operations Management Operations Management by R. Dan Reid & Nada R. Sanders 4th Edition © Wiley 2010 © Wiley 2010 1  Learning Objectives Define and explain OM Explain the role of OM in business Describe the decisions that operations managers make Describe the differences between service and manufacturing operations Identify major historical developments in OM Identify current trends in OM Describe the flow of information between OM and other business functions © Wiley 2010 2 Operations Management: The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company A management function An organization’s core function In every organization whether Service or Manufacturing, profit or Not for profit © Wiley 2010 3 Typical Organization Chart © Wiley 2010 4 OM’s Transformation Process © Wiley 2010 5 OM’s Transformation Role To add value Increase product value at each stage Value added is the net increase between output product value and input material value Provide an efficient transformation Efficiency – means performing activities well for least possible cost © Wiley 2010 6 Manufacturers vs Service Organizations Services: Manufacturers: Simultaneous Output can be stored for production and later use consumption Non-heterogeneous Heterogeneous output output Intangible product Tangible product Perishable, i.e., product Non-perishable, i.e., cannot be inventoried product is inventoried High customer contact Low customer contact Short response time Longer response time Labor intensive Capital intensive © Wiley 2010 7 Similarities for Service/Manufacturers Both use technology Both have quality, productivity, & response issues Both must forecast demand Both can have capacity, layout, and location issues Both have customers, suppliers, scheduling and staffing issues © Wiley 2010 8 Service vs Manufacturing Manufacturing often provides services Services often provides tangible goods Some organizations are a blend of service/manufacturing/quasi- manufacturing Quasi-Manufacturing (QM) organizations QM characteristics include Low customer contact & Capital Intensive © Wiley 2010 9 Growth of the Service Sector Service sector growing to 50-80% of non-farm jobs Global competitiveness Demands for higher quality Huge technology changes Time based competition Work force diversity © Wiley 2010 10 OM Decisions Strategic decisions & Tactical Decisions Strategic Decisions – set the direction for the entire company; they are broad in scope and long-term in nature Tactical decisions focus on specific day-to-day issues like resource needs, schedules, & quantities to produce Strategic decisions less frequent than tactical decisions Tactical and Strategic decisions must align © Wiley 2010 11 OM Decisions © Wiley 2010 12 Plan of Book-Chapters link to Types of OM Decisions © Wiley 2010 13  Historical Events in OM Era Events/Concepts Dates Originator Steam engine 1769 James Watt Industrial Division of labor 1776 Adam Smith Revolution Interchangeable parts 1790 Eli Whitney Principles of scientific 1911 Frederick W. Taylor management Frank and Lillian Scientific Time and motion studies 1911 Gilbreth Management Activity scheduling chart 1912 Henry Gantt Moving assembly line 1913 Henry Ford Copyright 2006 John Wiley & Sons, Inc. 1-14  Historical Events in OM (Cont.) Era Events/Concepts Dates Originator Hawthorne studies 1930 Elton Mayo Human 1940s Abraham Maslow Relations Motivation theories 1950s Frederick Herzberg 1960s Douglas McGregor Linear programming 1947 George Dantzig Digital computer 1951 Remington Rand Simulation, waiting Operations Operations research line theory, decision 1950s Research groups theory, PERT/CPM 1960s, Joseph Orlicky, IBM MRP, EDI, EFT, CIM Copyright 2006 1970s and others John Wiley & Sons, Inc. 1-15  Historical Events in OM (Cont.) Era Events/Concepts Dates Originator JIT (just-in-time) 1970s Taiichi Ohno (Toyota) TQM (total quality W. Edwards Deming, 1980s management) Joseph Juran Quality Strategy and Wickham Skinner, Revolution 1990s operations Robert Hayes Business process Michael Hammer, 1990s reengineering James Champy Copyright 2006 John Wiley & Sons, Inc. 1-16  Historical Events in OM (Cont.) Era Events/Concepts Dates Originator Globalization WTO, European Union, 1990s Numerous countries and other trade 2000s and companies agreements Internet Internet, WWW, ERP, 1990s ARPANET, Tim Revolution supply chain Berners-Lee, SAP, management i2 Technologies, ORACLE, PeopleSoft E-commerce 2000s Amazon, Yahoo, eBay, and others Copyright 2006 John Wiley & Sons, Inc. 1-17 Today’s OM Environment Customers demand better quality, greater speed, and lower costs Companies implementing lean system concepts – a total systems approach to efficient operations Recognized need to better manage information using ERP and CRM systems Increased cross-functional decision making © Wiley 2010 18 OM in Practice OM has the most diverse organizational function Manages the transformation process OM has many faces and names such as; V. P. operations, Director of supply chains, Manufacturing manager Plant manger, Quality specialists, etc. All business functions need information from OM in order to perform their tasks © Wiley 2010 19 Business Information Flow © Wiley 2010 20 OM Across the Organization Most businesses are supported by the functions of operations, marketing, and finance The major functional areas must interact to achieve the organization goals © Wiley 2010 21 OM Across the Organization – con’t Marketing is not fully able to meet customer needs if they do not understand what operations can produce Finance cannot judge the need for capital investments if they do not understand operations concepts and needs Information systems enables the information flow throughout the organization Human resources must understand job requirements and worker skills Accounting needs to consider inventory management, capacity information, and labor standards © Wiley 2010 22 Chapter 1 Highlights OM is the business function that is responsible for managing and coordinating the resources needed to produce a company’s products and services. The role of OM is to transform organizational inputs into company’s products or services outputs OM is responsible for a wide range of decisions, ranging from strategic to tactical. Organizations can be divided into manufacturing and service organizations, which differ in the tangibility of the product or service © Wiley 2010 23 Chapter 1 Highlights – con’t Many historical milestones have shaped OM. Some of these are the Industrial Revolution, scientific management, the human relations movement, management science, and the computer age OM is highly important function in today’s dynamic business environment. Among the trends with significant impact are just-in-time, TQM, reengineering, flexibility, time-based competition, SCM, global marketplace, and environmental issues OM works closely with all other business functions © Wiley 2010 24