Operations Management (opm530) -c1 Introduction

Operations Management Introduction Chapter 1 Prepared by : Shatina Saad

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Outline ♦ WHAT IS OPERATIONS MANAGEMENT? ♦ ORGANIZING TO PRODUCE GOODS AND SERVICES ♦ WHY STUDY OM? ♦ WHAT OPERATIONS MANAGERS DO ♦ WHERE ARE THE OM JOBS? ♦ OPERATIONS IN THE SERVICE SECTOR ♦ EXCITING NEW TRENDS IN OPERATIONS MANAGEMENT ♦ THE PRODUCTIVITY ISSSUE Prepared by : Shatina Saad

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Learning Objectives When you complete this chapter, you should be able to : Identify or Define: ♦ ♦ ♦ ♦

Production and productivity Operations Management (OM) What operations managers do Services

Describe or Explain: ♦ ♦ ♦

Career opportunities in operations management The future of the discipline Measuring productivity

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What Is Operations Management? Production is the creation of goods and services Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs Prepared by : Shatina Saad

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Significant Events in OM

♦ Division of labor (Smith, 1776) ♦ Standardized parts (Whitney, 1800) ♦ Scientific management (Taylor, 1881) ♦ Coordinated assembly line (Ford 1913) ♦ Gantt charts (Gantt, 1916) ♦ Motion study (the Gilbreths, 1922) 1-5 Prepared by : Shatina Saad

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Significant Events Continued

♦ CPM/PERT (Dupont, 1957) ♦ MRP (Orlicky, 1960) ♦ CAD ♦ Flexible manufacturing systems (FMS) ♦ Manufacturing automation protocol (MAP) ♦ Computer integrated manufacturing (CIM) 1-6 ♦ Enterprise Resource Planning Prepared by : Shatina Saad

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The Economic System Transforms Inputs to Outputs Inpu ts

Process

Outputs

Land, Labor, Capital, Managem ent

The economic system transforms inputs to outputs at about an annual 2.5% increase in productivity (capital 38% of 2.5%), labor (10% of 2.5%), management (52% Feedback loop of 2.5%)

Goods and Services

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Characteristics of Goods

♦ Tangible product ♦ Consistent product definition ♦ Production usually separate from consumption ♦ Can be inventoried ♦ Low customer interaction Prepared by : Shatina Saad

© 1995 Corel Corp.

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Characteristics of Service ♦ Intangible product

© 1995 Corel Corp.

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♦ Produced & consumed at same time ♦ Often unique ♦ High customer interaction ♦ Inconsistent product definition ♦ Often knowledgebased 1-9 ♦ Frequently dispersed

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Goods Versus Services Goods Service ♦ Can be resold ♦ Can be inventoried

♦ Some aspects of quality measurable ♦ Selling is Prepared by : Shatina Saad

♦ Reselling unusual ♦ Difficult to inventory ♦ Quality difficult to measure ♦ Selling is part of service 1-10

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Goods Versus Services - Continued Goods ♦Service Product is transportable ♦ Site of facility important for cost

♦ Provider, not product is transportable ♦ Site of facility important for customer contact ♦ Often easy to ♦ Often difficult to automate automate ♦ Revenue ♦ Revenue generated primarily from 1-11 generated tangible primarily from Prepared by : Shatina Saad

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Organizing to Produce Goods and Services ♦Essential functions: ♦ Marketing

– generates demand ♦ Operations –creates the product ♦ Finance/accounting – tracks organizational performance, pays bills, collects money

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Functions - Bank Commercial Bank © 1984-1994 T/Maker Co.

Marketing

Teller Scheduling

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Operations

Check Clearing

Finance/ Accounting

Transactions Processing

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Security

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Functions Manufacturer Manufacturing

Marketing

Operations

Manufacturing Production Control Prepared by : Shatina Saad

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Quality Control

Finance/ Accounting

Purchasing

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Organizational Charts Operations Teller Scheduling Check Clearing Transactions processing Facilities design/layout Vault operations Maintenance Prepared by : Shatina Saad Security

Commercial Bank Finance Investmen ts Security Real Estate Accounti

ng Auditing 1-15

Marketing Loans Commercial Industrial Financial Personal Mortgage

Trust Department OPM 533

Organizational Charts Manufacturing Facilities:

Operations

Finance & Accounting

Construction:maintenance

Production & inventory control Scheduling: materials control

Supply-chain management Manufacturing

Tooling, fabrication,assembly

Design Product development and design Detailed product specifications

Industrial engineering Efficient use of machines, space, and personnel

Process analysis Development and installation of production tools and equipment Prepared by : Shatina Saad

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Disbursements/cr edits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issues and recall

Marketi ng Sales promotio ns Advertisi ng Sales Market research

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Why Study OM? ♦ OM is one of three major functions (marketing, finance, and operations) of any organization. ♦ We want (and need) to know how goods and services are produced. ♦ We want to understand what operations managers do. ♦ OM is such a costly part of an 1-17 Prepared by : Shatina Saad

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What Operations Managers Do Plan - Organize - Staff Lead - Control

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Where Are the OM Jobs?

♦ Technology/methods ♦ Facilities/space utilization ♦ Strategic issues ♦ Response time ♦ People/team development ♦ Customer service ♦ Quality ♦ Cost reduction ♦ Inventory reduction ♦ Productivity improvement Prepared by : Shatina Saad

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Productivity ♦ Measure of process improvement ♦ Represents output relative to input

Units produced Productivity = Input used ♦ Only through productivity increases can our standard of living improve

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Multi-Product Productivity Productivity

=

Output Labor + material + energy + capital + misc

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Measurement Problems ♦ Quality may change while the quantity of inputs and outputs remains constant ♦ External elements may cause an increase or decrease in productivity ♦ Precise units of measure may be lacking Prepared by : Shatina Saad

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Productivity Variables ♦ Labor - contributes about 10% of the annual increase ♦ Capital - contributes about 32% of the annual increase ♦ Management - contributes about 52% of the annual increase Prepared by : Shatina Saad

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Key Variables for Improved Labor Productivity ♦ Basic education appropriate for the labor force ♦ Diet of the labor force ♦ Social overhead that makes labor available ♦ Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge 1-24 Prepared by : Shatina Saad

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Service Productivity ♦ Typically labor intensive ♦ Frequently individually processed ♦ Often an intellectual task performed by professionals ♦ Often difficult to mechanize ♦ Often difficult to evaluate for quality Prepared by : Shatina Saad

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New Challenges in OM From ♦ Local or national focus ♦ Batch shipments ♦ Low bid purchasing

To ♦ Global focus ♦ Just-in-time ♦ Supply chain partnering

♦ Lengthy product development Prepared by : Shatina Saad

♦ Standard

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♦ Rapid product development, alliances ♦ Mass customization ♦ Empowered employees,

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Changing Challenges for the Operations Manager Past Causes Future Local or national focus Batch(large) shipments Low-bid purchasing Lengthy product development

Low-cost, reliableworldwide communicationand transportationnetworks Costof capital puts pressureon reducinginvestmentin inventory Quality emphasis requires that suppliers beengagedinproduct improvement Shorter lifecycles, rapid international communication, computer-aideddesign, and international collaboration

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Global Focus Just-in-time shipments Supply-chain partners Rapidproduct development, alliances, collaborative designs OPM 533

Changing Challenges for the Operations Manager Past Standardized products J ob specialization Lowcost focus

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Causes Affluenceandworldwidemarkets; increasingly flexibleproduction processes Changingsociocultural milieu. Increasingly aknowledgeand informationsociety. Environmental issues, ISO14000, increasingdisposal costs

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Future Mass customization Empowered employees, teams, andlean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing OPM 533