Operations Management Chapter 1-3 PDF

COPY: COM KEY DIFFERENCES OPERATIONS MANAGEMENT  Customer Contact GROUP 1 CHAPTER 1 The approach for dealing with a client's concern before,...

COPY: COM KEY DIFFERENCES OPERATIONS MANAGEMENT  Customer Contact GROUP 1 CHAPTER 1 The approach for dealing with a client's concern before, during, as well as after the acquisition of an item as well Introduction to Operations Management as service. Operations Management  Measurement of Productivity The part of a business organization that is responsible for Involves assessing how effectively inputs are converted producing goods and services into outputs Basic Function of the Business Organization  Uniformity of Input Each client presents a somewhat unique situation that requires assessment and flexibility  Uniformity of Output The consistency and standardization of products or services produced by an organization  Labor Content of Jobs Refers to the amount of work time required by employees to complete specific tasks or processes  Production and Delivery Involving the creation and distribution of goods or services.  Quality Assurance Process designed to ensure that products or services meet specified quality standards  Evaluation of Work Goods- Service Continuum The process of assessing and analyzing the performance Products are typically neither purely goods or purely of employees Service based.  Amount of Delivery Manufacturing vs. Service The quantity of goods or materials that a company holds Manufacturing and service organizations differ clearly at any given time. because manufacturing is goods oriented and service is  Ability to Patent Design act oriented The legal capacity to obtain a patent for a new and Production of Goods Vs. Delivery Of Service original design under intellectual property law Production of goods –tangible output GOODS VS. SERVICE Delivery of service -an act Service Job Categories -Government -Healthcare  Types of Operations Goods Producing Exchange  Farming  Retailing  Mining  Wholesaling  Construction  Financial Advising  Manufacturing  Renting  Power Generation  Leasing Storage/Transportation Entertainment Managing services is challenging  Trucking  Films 1. Jobs in services are often less structured than in manufacturing.  Mail  Radio 2. Customer contact is generally much higher in  Service  Television services compared to manufacturing 3. Worker skill levels are low compared to those  Moving  Concerts Manufacturing employees.  Taxis  Recording 4. Services are adding many new workers in low- skill, entry level positions Communication 5. Employee turnover is high in services, especially  Newspaper in low-skill jobs. 6. Input variability tends to be higher in many  Radio service environments than in manufacturing.  Newscast  Telephone  Satellites Role of Operations Manager Operations Function- consists of all activities directly related to producing goods or providing services.  System Design Decisions  System Operation Decisions System Design Decisions  Facility Location  Facility Layout  Capacity  Product and Service planning  Acquisition and Placement of  Equipment System Operation Decisions  Management of personnel  Inventory Management and control  Scheduling   Project Management Mathematical Models - Do not look at all like their real-  Quality Assurance life counterparts Keys to successfully using a model in decision making : III. KEY DECISIONS OF OPERATIONS MANAGERS - What is its purpose?  Most operations decisions involve many - How is it used to generate results? alternatives that can have quite different - What are the model's assumptions and limitations? impacts on costs or profits - How are the results interpreted and used?  Typical operations decisions include: Benefits of Models - WHAT: What resources are needed, and in what amounts? 1. Models are easier and cheaper to use than the real thing. - WHEN: When will each resource be needed? When should the work be scheduled? When should materials 2. They help organize and understand information and other supplies be ordered? better. - WHERE: Where will the work be done? 3. They let you test different "What if?" scenarios to see possible outcomes. - HOW: How will he product or service be designed? How will the work be done? How will resources be allocated? 4. They provide a clear way to evaluate problems and use the same format every time. - WHO: Who will do the work? 5. They use math to solve problems more effectively. Operations Management Decision Making C) Metrics and Trade - Offs  Models  Quantitative approaches Performance Metrics  Performance metrics -All managers use metrics to manage and control  Analysis of trade-offs operations:  Systems approach  Establishing priorities - Profits, costs, productivity and forecast accuracy.  Ethics Analysis of Trade - Offs General Approach to Decision Making -A trade off is giving up one thing in return for something A) Modeling- is a key tool used by all decision else. makers. - Carrying more inventory (an expense) in order to B) Model - an abstraction of reality; a simplification achieve a greater level of customer service. of something. D) Systems Approach Common features of models: System - a set of interrelated parts that must work Models simplify real- life systems by leaving out together unimportant details, so we can focus on the most crucial aspects. The business organization is a system composed of subsystems: Types of Models:  marketing subsystem Physical Models - Look like their real-life counterparts  operations subsystem Schematic Models - Look less like their real-life  finance subsystem counterparts than physical models The systems approach  - Craft Production - Division of Labor - Adam Smith (1776) - Emphasizes interrelationships among subsystems - Main theme is that the whole is greater than the sum of B. SCIENTIFIC MANAGEMENT (1911) its parts - Also known as Taylorism. - Developed by Frederick - The output and objectives of the organization take Winslow Taylor, the Father of precedence over those of any one subsystem Scientific Management. E) Establishing Priorities - Explained that the optimization of work translated to productivity and efficiency and - In nearly all cases, certain issues or items are more not how the workers were made to work hard. important than others Frank Bunker Gilbreth & Lillian Evelyn Gilbreth -Recognizing this allows managers to focus their attention to those efforts that will do the most good  Father of Motion Studies. Pareto Phenomenon  Develop a study method of time-and-motion study. A few factors account for a high percentage of occurrence of some event(s)  Publication of Motion Study in 1911.  80-20 Rule: 80% of problems are caused by 20% Henry Laurence Gantt of the activities.  Develop the Gantt Chart  The critical few factors should receive the scheduling system. highest priority  Incorporates the record of the work that has  This is a concept that is appropriately applied to been done, balanced with the work that still all areas and levels of management needs to be completed. F) Ethical Issues in Operations Harrington Emerson Ethical issues arise in many aspects of operations  Installing his management management: methods at many industrial firms and to promote the ideas - Financial statements of scientific management and - Worker safety efficiency to a mass audience. - Product safety - Quality  Emerson Efficiency system - The environment Henry Ford - The community - Hiring and firing workers  Employed scientific management techniques to - Closing facilities his factories. - Workers’ rights  Introduced the Moving Assembly Line and Mass Production. IV. Historical Evolution of Operations Management A. INDUSTRIAL REVOLUTION (1770s) C. HUMAN RELATIONS MOVEMENT (1920s) - Began in England in the 1770s Emphasized the importance of the human element in job - The Industrial Revolution saw the emergence of the design. modern corporation, in which work, usually in a factory setting, was specialized and coordinated by George Elton Mayo managers.   Hawthorne Theory (1930) V. KEY TRENDS AND ISSUES IN BUSINESS Emphasizes the needs for manager to prioritize the Key trends and issues in business often evolve, but some interest of their employees includes: Abraham Harold Maslow  Management of Technology  Globalization  Hierarchy of Needs (1954)  Outsourcing Physiological needs, safety and security, love and  Management of Supply Chain belonging, self esteem and self actualization. SUPPLY CHAIN William G. "Bill" Ouchi RAW MATERIALS> SUPPLIER> MANUFACTURER>  Theory Z (1981) DISTRIBUTOR> RETAILER> CUSTOMER Focuses on increasing employee loyalty to the company  Customer by providing a job for life.  Forecasting  Design Frederick Irving Herzberg  Capacity Planning  Two Factor Theory (1959)  Inventory  Purchasing Argues that job satisfaction and dissatisfaction exist in  Suppliers two different ways.  Location Douglas Murray McGregor  Theory X and Theory Y (1960s) GROUP 2 CHAPTER 2 Is the understanding of different management approaches and their impact of employee behavior and COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY performance. COMPETITIVENESS How effectively an organization meets the needs and D.DECISION MODELS & MANAGEMENT SCIENCE (1915, wants of customers relative to others that offer similar 1960s-1970s) goods and services. Accompanied by the development of several Businesses Compete Using Marketing quantitative techniques. Identifying Customer Wants and Needs Ford Whitman Harris - Mathematical model in 1915 This involves understanding the specific desires and Harold French Dodge, Harry Romig, Walter Andrew requirements of target customers, including their Shewhart- Sampling and quality control in 1930. preferences, pain points, and motivations Leonard Henry Caleb Tippett- Statistical Sampling Pricing and Quality Theory in 1935 Striking a balance between offering competitive prices E. INFLUENCE OF JAPANESE MANUFACTURERS and ensuring high-quality products or services.  Japanese manufacturers developed Advertising and Promotion management practices that increase the Effectively communicating the value proposition of the productivity and quality. company's offerings to potential customers.  Just-in-time production Product and Service Design : Developing products and services that meet customer needs and expectations. (a great product) Cost : Minimizing production and delivery costs to offer decision making and distinctive competencies? competitive prices. (keep costs low) STRATEGY Location : Strategically choosing locations that provide MISSION: The reasons for existence for an organization. access to customers and resources. (a location thats easy for people to get to) MISSION STATEMENT: States the purpose of an organization. Quality : Ensuring consistent quality in all aspects of the organization's operations. (high quality) GOALS: Provide detail and scope of mission Quick Response : Providing timely delivery and service to STRATEGIES: Plans for achieving organizational goals. meet customer demands. (fast delivery and service) TACTICS: The methods and actions taken to accomplish Flexibility : Adapting to changing customer needs and strategies market conditions. (adapt to changes in customers preferences) Inventory Management : Optimizing inventory levels to minimize costs and ensure timely product availability. (inventory) Supply Chain Management : Managing the flow of goods and services from suppliers to customers effeciently. (effecient supply chain) Service (Quality): Providing excellent customer service and support. (customer service) Managers and Workers: Investing in training and development to create a skilled and motivated workforce. (skilled and motivated workforce) Why Some Organization Fail STRATEGY EXAMPLE 1. Too much emphasis on short- term financial Rita is a high school student. She would like to have a performance career in business, have a good job, and earn enough 2. Failing to take advantage of strengths and income to live comfortably. opportunities 3. Neglecting operations strategy Mission: Live a good life 4. Failing to recognize competitive threats  Goal: Succesful career, good income 5. Too much emphasis in product and service design and not enough on improvement  Strategy: Obtain a college education 6. Neglecting investments in capital and human  Tactics: Select a college and a major resources 7. Failing to establish good internal  Operations: Register, buy books take courses, communications study, graduate, get job 8. Failing to consider customer wants and needs EXAMPLE OF STRATEGIES  Low Cost MISSION, STRATEGY, TACTICS  Scale-based strategies How does mission, strategies and tactics relate to  Specialization  Flexible operations   High quality  Human resources  Service  Facilities and Equipment  Financial resources  Customers STRATEGY AND TACTICS  Products and Services Distinctive Competencies  Technology  Suppliers The special attributes or abilities that give an organization a competitive edge. Operations Strategy- The approach, consistent with organization strategy that is used to guide the operations Strategy Factors function.  Price Strategic OM Decisions  Quality  Time Decision Area  Flexibility  Product and service design  Service  Capacity  Location  Process selection and layout GLOBAL STRATEGY  Work design  Location  Strategic decisions must be made with respect  Quality to globalization.  Inventory  What works in one country may not work in  Maintenance others.  Scheduling  Other issues- Political, social, culturan, and  Supply Chain economic differences  Projects Affects Strategy Formulation  Cost, quality liability and environmental Order Qualifiers  Cost structure, flexibility  Characteristics that a customer perceive as  Cost flexibility, skill level, capacity minimum standards of acceptability to be  Quality of work life, employee saftery considered as a potential customer. and productivity  Cost, visibility Order Winners  Ability to meet or exceed customer  Characteristics of an organization's goods or expectations services that cause it to be perceived as better  Cost, shortages than the competition  Cost, equipment reliability, productivity  Flexibility and efficiency Key External Factors  Cost, quality, agility, shortages, vendor  Economic conditions relations  Political conditions  Costs, new products, services, or  Legal Environment operating systems  Technology Quality and Time Strategies  Competition  Markets Quality-based strategies Key Internal Factors  Focuses on maintaining or improving the quality of an organization's product and services. Team-based strategies explained by changes in inputs alone.  Focuses on reduction of time needed to accomplish tasks Partial Measures- measure focus on the relationship between output and a single input. Some partial productivity measures are: Labor Productivity - measure how much output is produced per unit of labor Ex. A bakery produces 100 loaves of bread in a day using 5 workers. Productivity Capital Productivity - measures output relative to the capital. A measure of how efficiently resources are used to produce goods or service. Ex. Old Oven: Can bake 10 loaves of bread per hour. Productivity Ratio New Oven: Can bake 20 loaves of bread per hour. A formula used to measure the efficiency of production by comparing the amount of output produced to the inputs used. Material Productivity -measure how much output is produced for a given amount of materials used. Ex. Old Process: A bakery used to waste a lot of flour during the mixing and kneading process. New Process: The bakery has implemented a new mixing machine that reduces flour waste significantly. Three measures of productivity Partial Measures measure focus on the relationship between output and a single input. Multifactor Measures measures the efficiency Energy Productivity -how efficiently energy is used to of multiple inputs used in production, but not produce outputs. necessarily all inputs. Ex. Old Oven: The bakery used to have old, inefficient Total Measure measure of economic ovens that consumes a lot of energy. efficiency that captures the portion of output New Oven: The bakery has updated to new, energy growth that cannot be efficient ovens. Multifactor Productivity- measures the efficiency of multiple inputs used in production, but not necessarily all inputs. Ex. Year 1: A bakery produces 1000 loaves of bread with 5 workers, 2 oven, and 100 unit of energy. Year 2: The bakery produces 1200 loaves of bread with 4 workers, 2 oven, and 100 units of energy. Process Yeild- a measure of the efficiency of the process Calculation: in producing a desired output without defect. Year 1 MFP: 1000/ (5+2+100)= 9.09 loaves per unit input Year 2 MFP: 1200/ (4+2+100)= 11.32 loaves per unit input Total Factor Productivity- measure of economic efficiency that captures the portion of output growth Ex. If a bakery produces 100 loaves of bread and 95 of that cannot be explained by changes in inputs alone. them meet quality standards, the process yield would be (95 / 100) x 100 =95% FACTORS AFFECTING PRODUCTIVITY Ex. A bakery produces loaves of bread. Here's the data for two years. Capital - investment, quality, and utilization. Quality - high-quality product, quality process,and equality standard. Technology - automate, innovate, and improvements. Management - effective leadership, critical thinking and strategic planning, employee development, successful management. Productivity Growth- increase in output per unit over time. Other Factors Affecting Productivity  Standardization  Quality  Use of Internet  Computer Viruses   Searching for lost or misplace items Layout decisions focus on the arrangement of  Scrap Rates equipment, workspaces, and resources to maximize  New Workers efficiency and reduce waste.  Safety Process Selection and Layout decisions are influenced by  Shortage of I.T Workers decisions made in product and service design.  Layoffs  Labor Turnover Work Design and the Human Element  Design of the workspace Work Design- involves organizing tasks, responsibilities,  Incentives plans that reward productivity and workflows within production systems. OUTSOURCING- the process of contracting out specific It emphasizes the human aspect, acknowledging that business functions or processors to external providers. employees are crucial assets to an organization. IMPROVING PRODUCTIVITY What does product and service design do?  Develop productivity measure The various activities and responsibilities of product and  Determine critical (buttleneck) operations service design include the following:  Develop methods for productivity improvement  Establish reasonable goals  Translate customer wants and needs, into  Get management support product and service requirements.  Measure and publicize improvements (marketing, operations)  Don't confuse productivity with efficiency  Refine existing product and services. (marketing)  Develop new product and/or services. (marketing, operations) GROUP 3 CHAPTER 3  Formulate Quality Goods. (marketing, Chapter 3: Product and Service Design operations)  Formulate cost targets. (accounting, finance) Product and Service Design- refers to the process of  Construct and test prototypes. (operations, defining the features, characteristics, and functionality of marketing, engineering) a product or service to meet customer needs and expectations.  Document Specifications. Customer Satisfaction begins with product and service Reasons for Product and Service design or redesign design. Decisions made in this area impacts organizations The Main Forces that initiate design or redesign are overall success. Market Opportunities and Threats. 3 Key Considerations in Process Design: The factors that give rise to market opportunities and  Flexibility- Ability of the production system to threats can be one or more changes in: adapt to changes.  ECONOMIC – low demand; excessive warranty  Production Time- The speed at which products claim; the need to reduce cost or services can be developed and delivered.  SOCIAL AND DEMOGRAPHIC- aging baby boomers; population shifts  Cost- The total expenses involved in producing  POLITICAL, LIABILITY OR LEGAL- government goods or services. changes; safety issues; new regulations Process Selection and Layout Decisions  COMPETITIVE- new or changed products or services; new advertising/promotion Process Selection involves deciding on the best methods  COST OR AVAILABILITY- of raw materials; for production based on the product design, volume, and components; labour variety.  TECHNOLOGICAL- in product component processes   2.3. modular design- modules represent groupings of component parts into OBJECTIVES OF PRODUCT & SERVICE DESIGN subassemblies. The main focus of product and service design is 3. Reliability- is a measure of the ability of a product, a customer satisfaction. Hence, it is essential for designers part, a service, or an entire system to perform its to understand what the customer wants and design with intended function under a prescribed set of conditions. that in mind. 4. Robust design- also called the Taguchi Method, greatly Marketing is the primary source of this information. improves engineering productivity. By consciously THE PRIMARY OBJECTIVE INCLUDES considering the noise factors (environmental variation during the product's usage, manufacturing variation, and  MEETING CUSTOMER’S NEED component deterioration) and the cost of failure in the  DIFFERENTATION field the Robust Design method helps ensure customer  SUSTAINABILITY satisfaction. Legal, Ethical, and Environmental Issues 5. The Degree of Newness- products or service design Organizations generally want designers to adhere to change can range from the modification of an existing guidelines such as the following: product or service to an entirely new product or service.  Produce designs that are consistent with the 6. Cultural differences- products design in companies goals of organizations. that operate globally also must take into account any cultural differences of different countries or regions  Give customers the value they expect. related to the product.  Make health and safety a primary concern.  Consider potential to harm the environment. 7. Global Product design- are development could be a more sustainable solution; as a part of Globalization. LEGAL ISSUES PHASES IN PRODUCT DESIGN AND DEVELOPMENT  Consumer Protection Laws 1. Idea Generator- product development begin with ETHICAL ISSUES ideas.  Fair Labor Practices 2. Feasibility analysis- entail market analysis (demand), ENVIRONMENTAL ISSUES economic analysis (development cost and production cost, profit potential), and technical analysis(capacity  Waste Management requirements and availability, and the skills needed), can Other Issues in Product and Service Design answer the question "Does it fit with the mission?” 1. Life cycles- is the stages through which a product or its 3. Product specifications- involves detailed descriptions category bypass. of what is needed to meet (or exceed) customer wants, and requires collaboration between legal, marketing and 2. Standardization- the extent to which there is absence operations. of variety in a product, services or process. 4. Process specifications- alternatives must be weighed  2.1. mass customization- a strategy of producing in terms of cost, availability of resources, profit potential, standardized goods or services, but and quality. incorporating some degree of customization in the final product or services. 5. Prototype development- units are made to see if there are any problems with the product or process  2.2. delayed differentiation- the process of specifications. producing but not quite completing. 6. Design review- making any necessary changes, or abandoning. 7. Market test- used to determine the extent of Challenges of service design- service design presents consumer acceptance. some special challenges that are less likely to be encountered in product design, in part, because service 8. Production introduction- promoting the product. design also involves design of the delivery system. 9. Follow-up evaluation- determining if changes are GUIDELINES FOR SUCCESFUL SERVICE DESIGN needed, and refining forecasts. 1. Define the service package in detail. SERVICE DESIGN 2. Focus on the operation from the Service - refers to an act, something that is done for the customer perspective. customer. 3. Consider the image that the service package will present. Service delivery system - the facilities, processes; and 4. Recognize the designer familiarity with skills needed to provide a service. the system. Product bundle - the combination of goods and services 5. Make sure that managers are involved provided to a customer. and will support the design once it is implemented. Service package - the physical resources needed to 6. Define quality for both tangible and perform the service, the accompanying goods, and the intangibles. explicit and implicit services needed. 7. Make sure that recruitment, training and reward policies are consistent with service expectations. DIFFERENCES BETWEEN SERVICE DESIGN AND 8. Established procedures to handle both PRODUCT DESIGN predictable and unpredictable events. 9. Establish systems to monitor, maintain Service operations manager must contend with issues and improve service that may be insignificant or non-existent for managers in a production setting. These includes the following: OPERATION STRATEGY 1. Products are generally tangible; services are generally Operation strategy- refers to the plan an organization intangible. develops to manage its operations efficiently and effectively to achieve its overall business objectives. 2. Oftentimes services can be created and at the same time delivered. (haircut; carwash) Product and service design is a futile area for achieving competitive satisfaction. 3. Services cannot be inventoried. Potential sources of such benefits include the following: 4. Services are highly visible to the customers and must be designed with that in mind. (spa) 1. Increasing emphasis on component commonality. 5. Location is often important to service design with 2. Packaging products and ancillary service to convenience as a major factor. increase sales. PHASES IN THE SERVICE DESIGN PROCESS 3. Using multiple-use platforms. 4. Implementing tactics that will achieve the Service blue printing- a method used in a service design benefits of high volume while satisfying to describe and analyse a proposed service. customer needs. Characteristics of well-designed service system 5. Continually monitoring products and service for small improvements.  being consistent with the organization mission 6. Shorten the time it takes to get new or redesign  Being user friendly. goods and services to the markets  Being robust of variability is a factor.  Being easy to sustain  Being cost- effective.