Mgmt 405 Ch 1 Spr 2024-2025 PDF

Introduction; Chapter1 Department of Business Administration FALL 2024-2025 Chapter 1: Introduction to POM MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami F...

Introduction; Chapter1 Department of Business Administration FALL 2024-2025 Chapter 1: Introduction to POM MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Outline: What You Will Learn... ✓ Define the term operations management ✓ Identify the three major functional areas of organizations and describe how they interrelate ✓ Compare and contrast service and manufacturing operations ✓ Describe the operations function and the nature of the operations manager’s job ✓ Differentiate between design and operation of production systems ✓ Describe the key aspects of operations management decision making ✓ Briefly describe the historical evolution of operations management ✓ Identify current trends that impact operations management 2 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Definition of Production and Operations Management ✓ Do we need to produce? ✓ Or why do we produce? It is in our nature, so we have a need to produce stuff to ✓ survive (humanitarian aspect) ✓ earn money (commercial aspect) ✓ stand on your feet on your own (political aspect) 3 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Definition of Operations Management ✓ Production/Operations Management is: The management of that part of an organization that is responsible for producing goods and/or services. The management of systems or processes that create goods and/or provide services. i.e. Every book you read, every e-mail you send or every medical treatment you receive involves the operation function of one or more organizations. ✓ The aim of production and operations is to satisfy people’s wants or needs. ✓ Operations Management affects: The collective success or failure of companies’ POM Companies’ ability to compete locally Nation’s ability to compete internationally 4 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Business Organization ❖ The Three Basic Functions Fig 1.1 Organization Finance Operations Marketing All business organizations have these three basic functions so it doesn’t matter the business a hospital, a manifacturing firm, a car wash etc..... 5 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Basic Concepts ✓ Finance- is responsible for securing financial resources at favourable prices as well as analysing investment proposal and providing funds for marketing and operations. ✓ Marketing is responsible for assessing consumer needs or wants and selling and promoting the organization’s goods and services. ✓ Operations is responsible for producing the goods or providing the services offered by the organization. 6 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Value-Added Process ❖The operations function involves the conversion of inputs into outputs Value added Inputs Transformation/ Outputs Land Conversion Goods Labor process Services Capital Feedback Control Figure 1.2 Feedback Feedback 7 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Basic Concepts Input- Materials, labour, Data or unprocessed information, technology, equipment, legal constraints, government regulations etc.... ❖What type of skill do the employees need? ❖What type of materials does the firm need? Value-Added Activities- Performed with tools machines, techniques, human skills etc....i.e. Processing. ❖ How will the firm use its resources to produce its products/ how can the firm improve its operations? Output- Good and services. ❖ what are their needs/what sort of products will be produced? 8 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Value-added ✓ Value-added is the difference between the cost of inputs and the value or price of outputs. ✓ In non-profit organization, value-added of output is their value to society. ❖ The greater the value-added, the greater the effectiveness of these operations (i.e. High way construction, state school construction etc...). ✓ In profit organization, value-added of output is measured by prices that customers are willing to pay for those goods and services. ❖ Firms use the money generated by value-added for research and development, worker salaries and profit. ❖ The greater the value-added, The greater the amount of funds available for these purposes. 9 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved. 1 Introduction; Chapter1 0 The Production Function ✓ Production refers to the transformation of inputs or resources into outputs of goods and services. ✓ In other words, production refers to all of the activities involved in the production of goods and services to hiring workers, purchasing row materials, running quality control, cost accounting, and so on, rather than referring merely to the physical transformation of inputs into outputs of goods and services. MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved. 1 Introduction; Chapter1 1 The Organization of Production ✓ Inputs Labor, Capital, Land ✓ Fixed Inputs ✓ Variable Inputs ✓ Short Run At least one input is fixed ✓ Long Run All inputs are variable MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved. 1 Introduction; Chapter1 2 The Organization of Production ✓ Inputs: are the sources used in the production of goods and services and can be broadly classified into labour, capital, land, natural resources, and entrepreneurial talent. ✓ Fixed input: are those that cannot be readily changed during the time period under consideration such as a firm’s plant and specialized equipment. MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved. 1 Introduction; Chapter1 3 The Production Function ✓ The general equation of the production function of a firm using labour (L) and capital (K) to produce a good or service (Q) or shows the maximum amount of output (Q) that can be produced within a given time period with each combination of (L) and (K). This can be defined as follows: ✓ Cobb-Douglas Production fuction form was developed and tested by Charles Cobb and Paul Douglas during 1927–1947. Q= f (L,K) MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 The Factors of Production ❑ Factors that are effective in the production process are expressed in the production literature with the concept of "6M". 6Ms are the following elements: Materials Machinery Methods Men Money Minutes Slayt 14 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Is Goods-service combination a Continuum? Goods Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile Repair, fast food Home remodeling, retail sales Figure 1.3 Automobile assembly, steel making 15 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Why Product Packages? ✓ Because there are relatively few pure goods and pure services and therefore companies sell Product packages for their own benefit or interest. ✓ Product packages are a combination of goods and services. ✓ Product packages can make a company more competitive. 16 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Example of the transformation for Food Processor Inputs Processing Outputs Raw Vegetables Cleaning Canned Metal Sheets Making cans vegetables Water Cutting Energy Cooking Labor Packing Building Labeling Equipment Table 1.2 17 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Example of the transformation for Hospital Process Inputs Processing Outputs Doctors, nurses Examination Healthy Hospital Surgery patients Medical Supplies Monitoring Equipment Medication Laboratories Therapy Table 1.3 18 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Manufacturing or Service? Tangible Act ❖ Manufacturing and Service are often different in terms of what is done but quite similar in terms of how it is done. ❖ For example, manufacturers decide what size factory needed and service organizations must decide what size building is needed. ❖ Manufacturing and Service differ cause manufacturing is goods-oriented and service is act-oriented. 19 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Production of Goods vs. Delivery of Services ✓ Production of goods – tangible output ✓ Delivery of services – an act ✓ Service job categories Government (state, local, etc..) Wholesale/retail (clothing, food, stationery,etc..) Financial services (banking, insurance, etc..) Healthcare (doctors, dentists, hospitals, etc..) Personal services (laundry, dry cleaning, etc..) Business services ( data processing, e-business, etc..) Education (schools, colleges, etc..) 20 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Key Differences 1. Customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity 6. Production and delivery 7. Quality assurance 8. Amount of inventory 9. Evaluation of work 10. Ability to patent design 21 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Goods vs. Service Characteristic Goods Service Customer contact Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Output Tangible Intangible Measurement of productivity Easy Difficult Opportunity to correct problems High Low Inventory Much Little Evaluation Easier Difficult Patentable Usually Not usual 22 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Goods vs. Service U.S. Manufacturing vs. Service Employment Year Mfg. Service 45 79 21 90 Mfg. 50 72 28 80 55 72 28 Service 70 60 68 32 60 Percent 65 64 36 50 70 40 64 36 75 30 58 42 80 20 44 46 85 10 43 57 90 0 35 65 95 25 55 60 7565 45 50 70 75 80 85 90 95 00 02 05 00 30 70 02 25 75 Year ❖ This slide is excluded from the exam Figure 1.4 23 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Challenges of Managing Services ✓ Service jobs are often less structured than manufacturing jobs ✓ Customer contact is higher ✓ Worker skill levels are lower ✓ Services hire many low-skill, entry-level workers ✓ Employee turnover is higher ✓ Input variability is higher ✓ Service performance can be affected by worker’s personal factors ❖ This slide is excluded from the exam 24 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Key Decisions of Operations Managers ✓ What What resources/what amounts ✓ When Needed/scheduled/ordered ✓ Where Work to be done ✓ How Designed ✓ Who To do the work ❖ This slide is excluded from the exam 25 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Types of Operations Operations Examples Goods Producing Farming, mining, construction, manufacturing, power generation Storage/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 television newscasts, telephone, satellites 26 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Historical Evolution of O & P Management 1800 1900 1940 1970 1990 2000 27 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Historical Evolution of Operations Management ✓ System for P & O have existed since ancient times. The great wall of China Egyptian pyramids i.e. More than 100000 workers for 20 years. The ships of Roman empire The roads and aqueducts of the Roman ❖ These are all examples of the human ability to organize for operation and production ❖ These also show the roots of the Industrial Revolution 28 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Historical Evolution of Operations Management ✓ Industrial revolution (1770’s) ✓ Scientific management (1911) Mass production Interchangeable parts Division of labor ✓ Human relations movement (1920-60) ❖ A psychologist focusing on human factor in work-tiredness and motivation. ✓ Decision models (Harris 1915-inventory model, 1960-70’s) ❖ The factory movement was accompanied by the development of several quantitative techniques. After ww II-the importance of military and manifucturing sectors, the models of forecasting, inventory man., project man were developed. ✓ Influence of Japanese manufacturers ❖ JIT production, quality revolution, continual improvement etc. 29 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 The evolution of POM ❖ Production of goods remained at a handicraft level untill the Industrial revolution took place. In 1764, the Industrial revolution began and James Watt invented the steam engine and advanced the use of mecanical power to increase productivity. ❖ Eli Whitney (1798) found out and introduced the concepts of standardised parts and interchangeable parts. He then developed musket system because the type of muskets were handcrafted-he produced 10000 muskets by using the concept of interchangeable parts. ❖ By using the same concept, he allowed the manifacture of fire- alarms, clocks, watchs, sewing machines etc.. ❖ Soon after, by conducting the concept of steam engine, Richard Trevithick (1802) invented the first train and Richard Fulton (1807) invented the first steam boat. 30 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 The evolution of POM ❖ The first steam boat and the first train indicate a long stream of application in which human anad animal powers were replaced by engine power. ❖ The Industrial revolution was the transformation of a society from peasant and local occupation into a society with world wide connections in terms of great use of machinery and large- scale commercial operations. This is the first step of factory system. ❖ This system replaced the traditional production system by the concept of mass-production by bringing together large numbers of semi-skilled workers. ❖ Adam Smith’s ‘The wealth of nations’ (1776) pointed out the importances and advantages of the division of labor where the production process was broken down into series of small tasks and each performed by a different worker. 31 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 The evolution of POM ❖ With aid of the concept of the division of labor: ✓ Workers who continually perfomed the same task, they would gain skill and experience. ✓ Saving time or avoiding lost time due to changing jobs. ✓ Workers’ concentration on the same job increased would lead to the development of special tools and techniques for faster and easier task. ❖ Specialization jobs and division of labor began to take place. A prominent mathematician and engineer Charles babbage (1832) promoted an economic analysis of work and pay on the basis of skill requirement. ❖ In the earliest days of manufacturing, goods were produced using craft production-highly skilled workers conducting simple, flexible tools to produce small quantities customized goods. 32 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 The evolution of POM ❖ Frederick Taylor (1911) published ‘the priciples of scientific management’. This helped to achieve wide tasks in industry. ❖ Frank Gilber (principles of motion economy), Henry Gantt (schudeling and charts design for system) and Herrington Emerson (organizational efficiency) used Taylor’s ideas to improve the system of operation and production management. ✓ Influence of Japanese manufacturers ❖ JIT production, quality revolution, continual improvement etc. ❖ Using the concept of JIT production, Japanese manufacturers changed the rules of production from Mass Production to Lean Production. ❖ Lean production prizes flexibility rather then efficiency, as well as quality rather than quantity. This indicates the first step of ‘Era of Industrial globalization’. 33 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 The evolution of POM Figure 1.5 34 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 School of Management ✓ The process school of management was developed by Henry Fayol in 1900 management can be viewed as a continuous process the function of planning, organizing and controlling ✓ The behavioural school of management was developed by Elton Mayo in 1920 human relation movement on production output Productivity depends not only on the physical environment but also on social norms and personal feelings (i.e. Western Electric’s Hawthorne plant) 35 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 School of Management ✓ The quantitative school of management is concerned with decision making, mathematical modeling as well as system theory represents a productive system In 1915, Harris developed an Economic Order Quantity model for inventory management In 1931, Shewhart developed a Quantity decision model for use in Statistical quality control work In 1947, George Dantzing developed PERT/CPM In the late 1950s and early 1960s Edward Bowman, Robert Fetter and Elwood Buffa developed the concept called Modern poduction Management As computers became available in the 1950s, the power of opeartions research was multiplied. 36 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 School of Management ✓ The School of Modern Management In the late 1960s, MRP and CPR were introduced by Joseph Orlicky and Oliver White In the late 1970s, MRP II, JIT, TMQ and KANBAN systems were developed the School of Modern Management includes the system and the contingency approaches. these are also called new contemporary management approaches the system approach points out that an organization has interdependent factors as such individuals, status, motives, goals etc and must work together the contingency approach reveals that organizations are different so different and changing cases need to conduct different approaches and techniques in reaching a solution 37 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Trends in Industrial globalization ✓ Major trends The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior ❖ This slide is excluded from the exam 38 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 How does globalization differ from colonization? ❖‘‘since the collapse of the USSR, the dynamics of empire has changed. The World is now more multipolar and mercantile, with China and Europe emerging to compete against the US. Empire is more driven by multinational corporations, whose interests transcend those of any particular nation-state.’’ Source: STEVEN HIATT—"Global Empire: The Web of Control," A Game AsOld as Empire ❖What do you rekon about the difference? 39 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Summary for Historical Evolution of Operations Management 40 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Some Famous Scientists 41 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Some Famous Scientists 42 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Some Famous Scientists 43 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.  Introduction; Chapter1 Thanks 44 MGMT 405, POM, 2023/24. Lec Notes © Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.