Operations Management PDF

Operations are the production of goods and services within a business. Operations management involves managing the processes that create these goods and services. The supply chain includes the activities and organizations involved in producing and delivering a product. (Suppliers -> Producers -> D...

Operations are the production of goods and services within a business. Operations management involves managing the processes that create these goods and services. The supply chain includes the activities and organizations involved in producing and delivering a product. (Suppliers -> Producers -> Distributors -> Final Customers). Goods are physical items like automobiles and computers. services are activities providing value like air travel and legal counsel. The transformation process involves inputs, conversion, outputs, measurement, feedback, and control mechanisms. Products often combine goods and services. Similarities between production and service operations include: 1. **Objective**: Both aim to create value for customers, whether through goods or services. 2. **Operations Management**: Both require effective management of processes to ensure quality and efficiency. 3. **Supply Chain**: Both involve a sequence of activities and organizations to deliver the final product or service to customers. Differences between production and service operations include: 1. **Degree of Customer Contact**: Service operations typically involve higher customer interaction compared to production operations. 2. **Uniformity of Input**: Production operations often have more uniform inputs, while service operations can vary greatly depending on customer needs. 3. **Labor Content of Jobs**: Service operations generally require more labor- intensive roles due to the nature of providing services. 4. **Uniformity of Output**: Goods produced can be standardized, whereas services are often customized to individual customer preferences. 5. **Measurement of Productivity**: Productivity in production can be measured through output quantity, while service productivity is more challenging to quantify due to its intangible nature. 6. **Production and Delivery**: Goods can be produced and stored, while services are typically produced and consumed simultaneously. 7. **Quality Assurance**: Quality in production can be assessed through tangible metrics, while service quality often relies on customer satisfaction and experience. 8. **Amount of Inventory**: Goods can be inventoried, whereas services cannot be stored for later use. 9. **Evaluation of Work**: Evaluation in production is often based on output metrics, while service evaluation is based on customer feedback and experience. 10. **Ability to Patent Design**: Goods can often be patented, while services typically cannot be patented in the same way. Importance of learning about operations management Operations play a crucial role in all aspects of a business, including services like finance, marketing, accounting, and information. Understanding operations and supply chains is crucial for success and global awareness. Basic Functions of Business Identify the three major functional areas of organizations and explain how they interrelate Organizations' three major functional areas are Marketing, Operations, and Finance. These areas interrelate by finance supporting operations with budgeting and funding, while marketing influences operational decisions with demand data and competitor analysis. Roles in Operations Management Operations manager Supply chain manager Production analyst Schedule coordinator Production manager Industrial engineer Purchasing manager Inventory manager Quality manager OM-Related Professional Societies APICS - The Association for Operations Management American Society for Quality (ASQ) Institute for Supply Management (ISM) Institute for Operations Research and Management Science (INFORMS) The Production and Operations Management Society (POMS) The Project Management Institute (PMI) Council of Supply Chain Management Professionals (CSCMP) Process Management Process: one or more actions that transform inputs into outputs. 1. Business Processes: Upper-management processes: These govern the operation of the entire organization. Operational processes: These are core processes that make up the value stream. Supporting processes: These support the core processes. 2. Supply and Demand Management Supply > Demand: Wasteful and costly. Supply < Demand: Opportunity loss and customer dissatisfaction. Supply = Demand: Ideal situation. Process Variation Four Sources of Variation:  1. Variety of goods or services being offered - The greater the variety of goods and services offered, the greater the variation in production or service requirements. 2. Structural variation in demand - These are generally predictable. They are important for capacity planning. 3. Random variation - Natural variation that is present in all processes. Generally, it cannot be influenced by managers. 4. Assignable variation - Variation that has identifiable sources. This type of variation can be reduced, or eliminated, by analysis and corrective action. Variations can be disruptive to operations and supply chain processes. They may result in additional costs, delays and shortages, poor quality, and inefficient work systems. Describe the operations function and the nature of the operations manager’s job The operations function involves various activities such as forecasting, capacity planning, and quality assurance. The operations manager plays a key role in guiding the system through decision-making, with responsibilities including system design decisions like capacity planning, facility location, and product planning, as well as system operation decisions like inventory management and scheduling. While system design decisions are strategic and long-term, system operation decisions are tactical and operational, with operations managers focusing more on the latter. Operation management decision making involves considering different alternatives that can affect costs and profits. Decisions include what resources are needed, when they are needed, where the work will be done, how the product or service will be designed, and who will do the work. A general approach to decision making involves using modeling as a key tool. Models are abstractions of reality, simplifying and mimicking real-life phenomena by omitting unimportant details. This allows decision makers to focus on the most important aspects of the system being studied. Understanding models is crucial for decision-making, requiring knowledge of purpose, result generation, interpretation, assumptions, and limitations. Benefits include cost-effectiveness, organization of information, problem understanding, hypothetical analysis, consistency in evaluation, and mathematical application. However, limitations include a focus on quantitative data over qualitative, potential misapplication leading to misinterpretation, and the absence of a guarantee for good decisions despite model use. Vigilance is needed when utilizing models, especially complex computerized ones. Quantitative approaches in decision making include linear programming, queuing techniques, inventory models, project models, forecasting techniques, and statistical models. Performance metrics such as profits, costs, quality, productivity, flexibility, inventories, schedules, and forecast accuracy are important for managers to control operations. Trade-offs involve giving up one thing for another, such as carrying more inventory for better customer service. The systems approach views a business organization as a system with interconnected subsystems like marketing, operations, and finance, emphasizing their interrelationships. Prioritizing critical factors based on the Pareto Phenomenon helps managers focus on efforts that will have the greatest impact. The critical few factors should receive the highest priority Historical Evolution of OM Industrial Revolution Scientific Management Human Relations Movement Decision Models and Management Science Influence of Japanese Manufacturers Industrial Revolution Pre-Industrial Revolution o Craft production - System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods Some key elements of the industrial revolution o Began in England in the 1770s o Division of labor - Adam Smith, 1776 o Application of the “rotative” steam engine, 1780s o Cotton Gin and Interchangeable parts - Eli Whitney, 1792 Management theory and practice did not advance appreciably during this period Scientific Management Movement was led by efficiency engineer, Frederick Winslow Taylor o Believed in a “science of management” based on observation, measurement, analysis and improvement of work methods, and economic incentives  o Management is responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperation between management and workers, and separating management activities from work activities o Emphasis was on maximizing output Human Relations Movement The human relations movement emphasized the importance of the human element in job design o Lillian Gilbreth – applications of psychology o Elton Mayo – Hawthorne studies on worker motivation, 1930 o Abraham Maslow – motivation theory, 1940s; hierarchy of needs, 1954 o Frederick Hertzberg – Two Factor Theory, 1959 o Douglas McGregor – Theory X and Theory Y, 1960s o William Ouchi – Theory Z, 1981 Decision Models & Management Science F.W. Harris – mathematical model for inventory management, 1915 Dodge, Romig, and Shewart – statistical procedures for sampling and quality control, 1930s Tippett – statistical sampling theory, 1935 Operations Research (OR) Groups – OR applications in warfare George Dantzig – linear programming, 1947 Influence of Japanese Manufacturers  Refined and developed management practices that increased productivity o Credited with fueling the “quality revolution” o Just-in-Time production Key issues for operations managers today include economic conditions, innovating, quality problems, risk management, and competing in a global economy. Environmental concerns focus on sustainability, which involves using resources in a way that does not harm ecological systems supporting human existence. Ethical issues in operations include financial statements, worker safety, product safety, quality, the environment, the community, hiring and firing workers, and workers' rights. Operations managers must address these challenges in order to succeed in today's business environment. Supply chain management is crucial due to various issues like fluctuating inventory levels, stockouts, late deliveries, and quality problems. Factors include outsourcing, transportation costs, competition, globalization, e-business, supply chain complexity, and inventory management. Significant Events in Operations Management Early Concepts (1776-1880): Focused on labor specialization and standardized parts. Scientific Management Era (1880-1910): Introduced Gantt charts, motion & time studies, process analysis, and queuing theory.  Mass Production Era (1910-1980): Featured advancements such as the moving assembly line, statistical sampling, economic order quantity, linear programming, PERT/CPM, and material requirements planning. Lean Production Era (1980-1995): Emphasized just-in-time production, computer-aided design, electronic data interchange, total quality management, empowerment, and kanbans. Mass Customization Era (1995-2005): Covered globalization, the rise of the internet, enterprise resource planning, learning organizations, international quality standards, finite scheduling, supply chain management, and agile manufacturing. The Heritage of Operations Management Division of labor (Adam Smith 1776 and Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Coordinated assembly line (Ford/Sorenson/Avery 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950) Computer (Atanasoff 1938) CPM/PERT (DuPont 1957) Material requirements planning (Orlicky 1960) Computer aided design (CAD 1970) Flexible manufacturing system (FMS 1975) Baldrige Quality Awards (1980) Computer integrated manufacturing (1990) Globalization (1992) Internet (1995)