OM Notes - Operations Management Notes PDF

Here is a detailed set of notes with examples and additional explanations based on the PowerPoint presentation: Chapter 1: Operations and Productivity Learning Objectives ​ Define and understand: ○​ Operations Management (OM): The activities that create value in goods and...

Here is a detailed set of notes with examples and additional explanations based on the PowerPoint presentation: Chapter 1: Operations and Productivity Learning Objectives ​ Define and understand: ○​ Operations Management (OM): The activities that create value in goods and services by transforming inputs into outputs. ○​ Production: The creation of goods and services. ○​ Services: Activities that provide value to customers without tangible products. ○​ The roles and responsibilities of operations managers. ​ Describe: ○​ The history and evolution of OM. ○​ Career paths in OM and their relevance to business. ○​ Productivity measures and their impact on living standards. What is Operations Management? ​ Definition: Operations management is the process of managing resources to produce and deliver goods and services efficiently and effectively. ​ Example: A car manufacturing plant uses steel, labor, and machines to create vehicles. Operations management ensures resources are used optimally to produce high-quality cars. Key Points: 1.​ Every activity within a company is part of operations. 2.​ Even companies that produce physical goods rely on services, e.g., customer support or logistics. Main Organizational Functions 1.​ Marketing: Responsible for understanding customer needs and promoting the product or service. ○​ Example: Conducting surveys to identify customer preferences for a new smartphone model.  2.​ Operations: Focuses on the production or service delivery process. ○​ Example: Ensuring a factory meets daily production targets while maintaining quality. 3.​ Finance/Accounting: Manages budgets, tracks revenue, and allocates resources. ○​ Example: Creating a budget for a company-wide expansion project. Interrelationship Example: In a startup offering eco-friendly products: ​ Marketing identifies demand for reusable straws. ​ Operations sources materials and oversees manufacturing. ​ Finance secures funding and monitors costs. Organizational Structures ​ Banks: Operations include check clearing and vault management; marketing focuses on loans and mortgages. ​ Airlines: Operations manage flight scheduling and maintenance; marketing promotes reservations and pricing. ​ Manufacturing: Operations oversee supply chain and assembly; marketing focuses on product promotions and sales. Insight: As firms grow, functions like IT and human resources become critical for maintaining efficiency and competitiveness. Why Study Operations Management? 1.​ Understand how goods/services are produced. 2.​ Recognize OM as a major organizational cost. ○​ Example: Efficient operations can reduce waste and improve profits. 3.​ Develop skills that are valuable in multiple roles: ○​ Sales professionals can better coordinate with operations teams to meet customer expectations. ○​ Financial analysts gain insights into resource allocation. Career Opportunities: ​ Logistics coordinator, production manager, and supply chain analyst are some of the high-demand OM roles. Ten Critical Decisions in Operations Management  1.​ Service/Product Design: Defining what the product or service will be. ○​ Example: Tesla’s electric cars are designed to emphasize sustainability and innovation. 2.​ Quality Management: Setting standards for product or service quality. ○​ Example: McDonald’s ensures consistent food quality across all locations. 3.​ Process/Capacity Design: Planning efficient production processes. ○​ Example: Amazon warehouses use automated systems to manage large inventories. 4.​ Location: Choosing the best place for facilities. ○​ Example: Placing a warehouse near major highways to reduce shipping times. 5.​ Layout Design: Organizing physical resources for optimal workflow. ○​ Example: A coffee shop arranges its counters and equipment to minimize staff movement. 6.​ Human Resources/Job Design: Managing the workforce. ○​ Example: Hiring skilled baristas and providing training at Starbucks. 7.​ Supply Chain Management: Coordinating suppliers to ensure timely delivery of materials. 8.​ Inventory Management: Balancing stock levels to meet demand without overstocking. ○​ Example: Retail stores tracking seasonal trends to avoid unsold inventory. 9.​ Scheduling: Allocating resources to meet deadlines. 10.​Maintenance: Ensuring equipment and facilities are operational. Characteristics of Goods vs. Services Goods Services Tangible Intangible Can be inventoried Produced and consumed simultaneously Low customer interaction High customer interaction Example: Smartphones, Example: Healthcare, Legal advice Furniture Discussion Example: Compare McDonald’s (goods and services integration) with a gourmet restaurant focusing on customer interaction. Productivity Concepts ​ Definition: The ratio of outputs (goods/services) to inputs (resources used).  ​ Formula: Productivity = Output ÷ Input ​ Single-factor productivity: Output divided by one input (e.g., labor). ​ Multi-factor productivity: Output divided by multiple inputs (e.g., labor, materials, energy). Example Calculation: ​ Old system: Produces 8 titles/day with costs of $1,040/day. ○​ Productivity = 81,040=0.0077\frac{8}{1,040} = 0.0077 titles per dollar. ​ New system: Produces 14 titles/day with costs of $1,440/day. ○​ Productivity = 141,440=0.0097\frac{14}{1,440} = 0.0097 titles per dollar. Improving Productivity Starbucks Example: ​ Reducing credit card signature requirements saved 8 seconds per transaction. ​ New espresso machines saved 12 seconds per shot. ​ Result: Increased yearly revenue per outlet by $200,000 over six years. Key Strategies: 1.​ Invest in technology to enhance efficiency. 2.​ Train employees to improve skill levels. 3.​ Reorganize workflows to eliminate bottlenecks. Efficiency vs. Effectiveness ​ Efficiency: Doing tasks in the most resource-saving way. ○​ Example: A factory reduces waste in packaging processes. ​ Effectiveness: Choosing tasks that create value. ○​ Example: Developing a product that solves customer problems. Quote: “It is not enough to do your best; you must know what to do and then do your best.” — Edward Deming. Challenges in Operations Management 1.​ Transition from local to global markets. 2.​ Emphasis on just-in-time shipments to reduce inventory costs. 3.​ Increasing demand for mass customization and sustainable practices.