Introduction to Operations Management PDF

Introduction to Operations Management  Operations Management Operations Management is: The management of systems or processes that create goods and/or provide services Operations Management affects: – Companies’ ability to compete – Nation’s ability to compete international...

Introduction to Operations Management  Operations Management Operations Management is: The management of systems or processes that create goods and/or provide services Operations Management affects: – Companies’ ability to compete – Nation’s ability to compete internationally  The Organization The Three Basic Functions Organization Finance Operations Marketing  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 Feedback Feedback  Value-Added and Product Packages Value-added elements make the difference between the cost of inputs and the value or price of outputs. Product packages are a combination of goods and services. Product packages can make a company more competitive. The Goods–Service Continuum Goods Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile repair, fast food Home remodeling, retail sales Automobile assembly, steel making  Food Processor Inputs Processing Outputs Raw vegetables Cleaning Canned Metal sheets Making cans vegetables Water Cutting Energy Cooking Labor Packing Building Labeling Equipment  Hospital Inputs Processing Outputs Doctors, nurses Examination Treated Hospital Surgery patients Medical supplies Monitoring Equipment Medication Laboratories Therapy Manufacturing or Service? Tangible Act  Production of Goods vs. Delivery of Services Production of goods – tangible output Delivery of services – an act Service job categories – Government – Wholesale/retail – Financial services – Healthcare – Personal services – Business services – Education  Key Differences 1. Customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity  Key Differences 6. Production and delivery 7. Quality assurance 8. Amount of inventory 9. Evaluation of work 10. Ability to patent design  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 usually  Scope of Operations Management Operations Management includes: – Forecasting – Capacity planning – Scheduling – Managing inventories – Assuring quality – Motivating and training employees – Locating facilities – Supply chain management – And more...  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, financial advising, renting or leasing Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and TV newscasts, telephone, satellites  U.S. Manufacturing vs. Service Employment Year Mfg. Service 45 90 79 21 50 72 28 Mfg. 80 55 72 28 Service 70 60 60 68 32 Percent 65 50 64 36 70 40 64 36 75 30 58 42 80 44 46 20 85 43 57 10 90 35 65 0 95 25 75 45 50 55 60 65 70 75 80 85 90 95 00 02 05 00 30 70 02 25 75 Year  Singapore Manufacturing vs. Service Employment 80 70 60 50 Percent 40 Services Manufacturing 30 20 10 0 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 Year  Decline in Manufacturing Jobs Productivity – Increasing productivity allows companies to maintain or increase their output using fewer workers Outsourcing – Some manufacturing work has been outsourced to more productive companies  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  Key Decisions of Operations Managers What What resources/what amounts When Needed/scheduled/ordered Where Work to be done How Designed/Resources allocated Who To do the work  General Approaches to Decision Making 1. Models 2. Quantitative approaches 3. Performance metrics 4. Analysis of trade-offs 5. Systems approach 6. Establishing priorities 7. Ethics  1. Models A model is an abstraction of reality, a simplified representation of something. Classifications: – Physical models (scale-models; miniature cars) – Schematic models (charts, drawings, blueprints) – Mathematical models (formulas, symbols) What are the pros and cons of models?  Models Are Beneficial Easy to use, less expensive Require users to organize Increase understanding of the problem Enable “what if” questions Consistent tool for evaluation and standardized format Power of mathematics  Limitations of Models Quantitative information may be emphasized over qualitative Models may be incorrectly applied and results misinterpreted Nonqualified users may not comprehend the rules on how to use the model Use of models does not guarantee good decisions  2. Quantitative Approaches  Linear programming  Queuing techniques  Inventory models  Project models  Statistical models  3. Performance Metrics  To control different aspects of operations  Many: Profits Costs Quality Productivity Assets Inventory Schedules Forecast accuracy  4. Analysis of Trade-Offs Decision on the amount of inventory to stock – Increased cost of holding inventory vs. – Level of customer service 5. Systems Approach “The whole is greater than the sum of the parts.” Suboptimization  6. Establishing Priorities  Pareto phenomenon - a few factors account for a high percentage of the occurrence of some event(s).  80–20 Rule: 80% of problems are caused by 20% of the activities.  7. Ethical Issues Financial statements Worker safety Product safety Quality Environment Community Hiring/firing workers Closing facilities Worker’s rights Overlap of Business Functions Operations Finance Marketing  Operations Interfaces Legal Public Relations Accounting Operations Personnel/ Human resources MIS  Historical Summary of Operations Management Industrial revolution (1770s) Scientific management (1911) – Mass production – Interchangeable parts – Division of labor Human relations movement (1920–60) Decision models (1915, 1960–’70s) Influence of Japanese manufacturers  Trends in Business Major trends – The Internet, e-commerce, e-business – Management technology – Globalization – Management of supply chains – Outsourcing – Agility – Ethical behavior  Management Technology Technology – is the application of scientific discoveries to the development and improvement of goods and services Kinds of Technology where Operations Management is concerned about: Product and service technology Process technology Information technology  Simple Product Supply Chain Suppliers’ Direct Final Producer Distributor Suppliers Suppliers Consumer Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service  Other Important Trends Operations strategy Working with fewer resources Revenue management Process analysis and improvement Increased regulation and product liability Lean production