Introduction to Operations Management PDF

INTRODUCTION TO OPERATIONS MANAGEMENT  Learning Objectives The student should be able to: LO1.1 Define the terms operations management and supply chain. LO1.2 Identify similarities and differences between production and service operations....

INTRODUCTION TO OPERATIONS MANAGEMENT  Learning Objectives The student should be able to: LO1.1 Define the terms operations management and supply chain. LO1.2 Identify similarities and differences between production and service operations. LO1.3 Explain the importance of learning about operations management. LO1.4 Identify the three major functional areas of organizations and describe how they interrelate. LO1.5 Summarize the two major aspects of process management. LO1.6 Describe the operations function and the nature of the operations manager’s job. LO1.7 Explain the key aspects of operations management decision-making. LO1.8 Briefly describe the historical evolution of operations management. LO1.9 Describe current issues in business that impact operations management. LO1.10 Explain the need to manage the supply chain. D A S M A R I Ñ Let’s Get Started….. Introduction What is Operations? The part of a business organization that is responsible for producing goods or services. How can we define operations management? The management of systems or processes that create goods and/or provide services. Operations management refers to the systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external customers. De La Salle University D A S M A R I Ñ A S Introduction The ideal situation for a business organization is to achieve an economic match of supply and demand. Having excess supply or excess capacity is wasteful and costly; having too little means lost opportunity and possible customer dissatisfaction. The key functions on the supply side are operations and supply chains, and sales and marketing on the demand side. Goods Physical items produced by business organizations. The three (3) basic functions of business organizations Services Activities that provide some combination of time, location, form, and psychological value. De La Salle University D A S M A R I Ñ A S Introduction Operations and supply chains are intrinsically linked, and no business organization could exist without both. Operations Supply Chain is responsible for producing the goods or providing the services A sequence of organizations –their facilities, functions, and activities – that are involved in producing and delivering a product or service. offered by the organization. A simple product supply chain Operations management The management of systems or processes that create goods and/ or provide services De La Salle University D A S M A R I Ñ A S Introduction A supply chain of a loaf of bread – provides another illustration of a supply chain: a chain that begins with wheat growing on a farm and ends with a customer buying a loaf of bread in a supermarket. Note that the value of the product increases as it moves through the supply chain. A supply chain for bread De La Salle University D A S M A R I Ñ A S  Transformation Process The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labor, and information are used to create goods or services using one or more transformation processes (e.g., storing, transporting, repairing). The operations function involves the conversion of inputs into outputs De La Salle University D A S M A R I Ñ A S  Transformation Process Examples of inputs, transformation, and outputs De La Salle University D A S M A R I Ñ A S Production of Goods versus Providing Services Typical differences between production of goods and provision of services De La Salle University D A S M A R I Ñ A S Discuss: Why Learn about Operations Management? Identify the three major functional areas of organizations and describe how they interrelate. Finance and Operations? Marketing and Operations? The three major functions of business organizations overlap De La Salle University D A S M A R I Ñ A S Discuss: Why Learn about Operations Management? Operations also interact with other functional areas of the organization, including legal, management information systems (MIS), accounting, personnel/human resources, and public relations, Operations interfaces with anumber ofsupporting functions De La Salle University D A S M A R I Ñ A S  Process Management A key aspect of operations management is process management. A process consists of one or more actions that transform inputs into outputs. In essence, the central role of all management is process management. Businesses are composed of many interrelated processes. Generally speaking, thereare three categories of business processes: 1. Upper-management processes. These govern the operation of the entire organization. Examples include organizational governance and organizational strategy. Operational processes. These are the core processes that make up the value stream. Examples include 2. purchasing, production and/or service, marketing, and sales. Supporting processes. These support the core processes. Examples include accounting, human resources, and IT (information technology). 3. De La Salle University D A S M A R I Ñ A S  Process Management Business processes, large and small, are composed of a series of supplier-customer relationships, where every business organization, every department, and every individual operation is both a customer of the previous step in the process and a supplier to the next step in the process. Business processes form a sequence of suppliers and customers De La Salle University D A S M A R I Ñ A S  Business Process Management Two (2) Major Aspects of Process Management 1.Managing a Process to Meet Demand – having the right capacity requires having accurate forecasts of demand, the ability to translate forecasts into capacity requirements, and a process in place capable of meeting expected demand. 2. Process Variation –variation occurs in all business processes There are four basic sources of variation: 1. The variety of goods or services being offered. The greater the variety of goods and services, the greater the variation in production or service requirements. 2. Structural variation in demand. These variations, which include trends and seasonal variations, are generally predictable.They are particularly important for capacity planning. 3. Random variation. This natural variability is present to some extent in all processes, as well as in demand for services and products, and it cannot generally be influenced by managers. 4. Assignable variation. These variations are caused by defective inputs, incorrect work methods, out-of-adjustment equipment, and so on. This type of variation can be reduced or eliminated by analysis and corrective action. De La Salle University D A S M A R I Ñ A S  Scope of Operations Management The scope of operations management ranges across the organization. We can use an airline company to illustrate a service organization’s operations system. The system consists of airplanes, airport facilities, and maintenance facilities, sometimes spread out over a wide territory. The activities include: Forecasting Capacity planning Facilities and Managing Assuring Motivating and training Scheduling layout inventories quality employees De La Salle University D A S M A R I Ñ A S  Operations Management and Decision Making Key aspects of operations management decision making. Models Analysis of Trade-Offs Quantitative Approaches Establishing Priorities Operations Management Decision making key aspects A Systems Approach Performance Metrics Degree of Customization De La Salle University D A S M A R I Ñ A S  The Historical Evolution of Operations Management the widespread use of personal computers and user-friendly software in the workplace contributed to a Mass production resurgence in the popularity of these Interchangeable parts techniques. Division of labor The Human The Influence of The Industrial Relations Japanese Revolution Movement Manufacturers Scientific Decision Models Management and Management Science Craft production Heavily emphasized the technical Japanese manufacturers developed or refined System in which highly aspects of work design, management practices that increasedthe skilled workers use simple, the human relations movement productivity of their operations and the quality of flexible tools to produce em phasized their products, due in part to the influence of small quantities of the importance of the human Americans W. Edwards Deming and Joseph customized goods element in job design. Juran In the new millennium, IoT and resulting Industry 4.0 movement is driving change in operations and SCM. Alsothere is an increased focus on sustainability of environment, firm and society. De La Salle University D A S M A R I Ñ A S  Operations Today Lean Systems E-business E-commerce ERP Use of the Internet to transact business. Consumer-to business transactions All three can have a major impact on costs, productivity, and competitiveness. Product and service technology Process technology Information technology (IT) De La Salle University D A S M A R I Ñ A S  Key Issues for Today’s Business Operations Environmental Concerns Ethical Conduct 1 2 3 4 Elements of Supply Chain The Need to Manage the Supply Management Chain De La Salle University D A S M A R I Ñ A S  The Need to Manage Supply Chain Supply chain management is being given increasing attention as business organizations face mounting pressure to improve the management of their supply chains. The other issues include the following: 1. The need to improve operations 2. Increasing levels of outsourcing. 3. Increasing transportation costs. 4. Competitive pressures. 5. Increasing globalization 6. Increasing importance of e-business. 7. The complexity of supply chains 8. The need to manage inventories De La Salle University D A S M A R I Ñ A S  Key Points 1. The operations function is that part of every business organization that produces products and/or delivers services. 2. Operations consist of processes that convert inputs into outputs. Failure to manage those processes effectively will have a negative impact on the organization. 3. A key goal of business organizations is to achieve an economic matching of supply and demand. The operations function is responsible for providing the supply or service capacity for the expected demand. 4. All processes exhibit variation that must be managed. 5. Although there are some basic differences between services and products that must be taken into account from a managerial standpoint, there are also many similarities between the two. 6. Environmental issues will increasingly impact operations decision-making. 7. Ethical behavior is an integral part of good management practice. 8. All business organizations have, and are part of, a supply chain that must be managed De La Salle University D A S M A R I Ñ A S  Group Case Study A small, locally-owned coffee shop is experiencing a significant increase in customer demand, especially during peak hours. The shop's current operations are becoming strained, leading to long wait times and customer dissatisfaction. The owner is considering expanding the shop's capacity but is unsure about the best approach. Provide at least 5 probing questions your group will ask the coffee shop owner and give reasons/justifications on why you will ask these queries. Make sure you’re able to explain the relevance of each question on a specific aspect of the business. De La Salle University D A S M A R I Ñ A S Three Thoughts to Change the Mindset ▶ You are the ‘Business’ ▶ AlwaysThink like a CEO ▶ You are Leader, not an ‘Order Taker’ Follow these 3 principles everyday and see the magic. 23