Operations Management
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OPERATIONS MANAGEMENT Management of systems or processes that create goods and or services. What is Management ? getting things done thru other people
GOODS SERVICES Output Tangible Intangible Uniform Output High Low Labor Content Low High Customer Contact Low High Measure Productivity Easy Difficult Chance to Correct Quality Problem High Low
OPERATIONS MANAGER’S JOB Systems Design how much capacity is needed good location due to lowest cost product design - customer wants work system – productivity layout – arrangement of machines
OPERATIONS MANAGER’S JOB Systems Operations inventory – how much to order Scheduling – who’ll do the job quality control- performance against standard
Why study Prod & Ops Mgt?
POM is at the core of all business organization
50% or more of all jobs are in POM related areas
All other areas of business organization are related to POM
Historical Evolution of Prod & Ops Mgt 1.
2.
3.
4.
INDUSTRIAL REVOLUTION Craft Production- highly skilled worker using simple tools(custom-made) Development of Standard Gauging System- interchageable parts Substitute Machine Power to Human Power Economies of Scale- cost decrease as volume increase
DESCRIPTION CRAFT PRODUCTION 1. high variety customized output 2. Few highly skilled worker to complete entire unit of output MASS PRODUCTION 1. High volume of standard output 2. Division of Labor, specialized equipment, interchageable part.
EXAMPLES OF GOODS & SERVICES CRAFT PRODUCTION Landscaping, Tailoring, Diagnosis and Treatment of injuries, surgery. MASS PRODUCTION Automobile, Computers, mail sorting
ADVANTAGES CRAFT PRODUCTION More choices; tailored to customer needs. MASS PRODUCTION low cost per unit; requires low skilled workers
DISAVANTAGES CRAFT PRODUCTION slow; high cost; requires high skilled workers MASS PRODUCTION rigid system; volume at expense of quality
Historical Evolution of Prod & Ops Mgt SCIENTIFIC MANAGEMENT 1. Taylor’s Best Method of Doing Things-based on observation, measurement, analysis, improvement and economic incentives. (abuse the worker) 2. Henry Ford’s Mass Production: Division of Labor, Interchangeable 3. Workers are Regarded as Robots
Historical Evolution of Prod & Ops Mgt 1. 2.
3.
4.
HUMAN RELATIONS MOVEMENT Lilian Gilbreth- human factors in work Maslov’s Motivational Theoryphysiological, safety, recognition McGregor’s Theory X & Theory Y- how employee view work Ouchi’s Theory Z- lifetime employment, problem solving, consensus
Historical Evolution of Prod & Ops Mgt 1. 2.
MANAGEMENT SCIENCE Quantitative Technique - W W II Use of Computers
Historical Evolution of Prod & Ops Mgt 1. 2.
INFLUENCE OF JAPANESE MFG Started the Quality Revolution Characteristics: Continuous Improvement Worker Empowerment Customer Satisfaction
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
OPERATIONS CORE of business organizations - responsible for creation of goods and services
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
FINANCE Securing resources and allocating them throughout the organization.
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
MARKETING Focus on promotion and selling goods and services.
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
PURCHASING Procurement of materials, supplies and equipments.
HUMAN RESOURCES Recruitment and training of personnel.
MAINTENANCE Repair of equipment, buildings and grounds.
INDUSTRIAL ENGINEERING Scheduling, performance standard, work methods and quality control.
PUBLIC RELATIONS Maintaining positive public image.
OPERATIONS Activities directly related to producing goods and /or providing services
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
ENVIRONMENT Things that are outside the production system but influences it. 1. CUSTOMERS – changes in needs/wants 2. GOVT REGULATIONS – product safety 3. COMPETITORS – new product 4. TECHNOLOGY - new advances 5. SUPPLIERS – supply and prices 6. ECONOMY - inflation
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
INPUT (M’s) 1. 2. 3. 4. 5.
EQUIPMENT – tools SUPPLY – things CAPITAL – fund LABOR – knowledge & skills TIME – available for operations
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
TRANSFORMATION 1.
ALTER – change into a new form Physical Change – cut, assemble, formed, etc Sensual Change – cold into heat, beauty, music, etc Psychological Change – feeling of worth, feeling of friendship
TRANSFORMATION 2. TRANSPORT – more value if there is change of location
Brought to us – delivery of goods
Removed from us – disposal of waste
TRANSFORMATION 3. STORAGE – keep in safe place Warehouse Bank Day Care Hotel
TRANSFORMATION 4. INSPECTION – evaluate properties before purchase
Safety Certificate Quality Standard Appraisal Value Medical Examination
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
OUTPUT 1. 2.
PRODUCTS – physical goods SERVICES – abstract or nonphysical
All value-adding transformations are services, there may or may not be a set of accompanying facilitating goods.
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
MONITORING AND CONTROL MONITORING – must tell the manager when changes(errors) are occurring in any part of production system CONTROL - manager must apply corrective actions to alter the input or transformation system
OPERATIONS MANAGERS AND DECISION MAKING (TOOLS) 1.
MODELS Simplified version of something: PHYSICAL – looks like their real life; miniature cars, airplane,.. SCHEMATIC – less resemblance; pictures, drawings,… MATHEMATICAL- don’t look alike; formulas, symbols, …
OPERATIONS MANAGERS AND DECISION MAKING 1.
MODELS Advantages: Easy to use and less expensive than when dealing with actual bring the power of mathematics Better understanding of the problem
OPERATIONS MANAGERS AND DECISION MAKING 2. QUANTITATIVE APPROACHES Mathematical optimum allocation of scarce resources. Linear Programming, Queuing Techniques, Inventory Models, Forecasting Techniques, PERT-CPM .
OPERATIONS MANAGERS AND DECISION MAKING 3. ANALYSIS OF TRADE-OFF Considers the pros and cons of a certain course of action to determine the consequences of the decision. Example: overtime vs quality inventory vs customer service
OPERATIONS MANAGERS AND DECISION MAKING 4. SYSTEMS APPROACH The whole is greater than the sum of its individual parts. The objective of the organization as a whole takes precedence over those of any one system. example: Optimal solution vs dept/division/plant
OPERATIONS MANAGERS AND DECISION MAKING 5. ESTABLISHING PRIORITIES Certain elements are more importance than others. Effort must be directed where they will do the most good and to avoid wasting time and energy on insignificant elements.
OPERATIONS MANAGERS AND DECISION MAKING 5. ESTABLISHING PRIORITIES example: PARETO PHENOMENON Some things (few) are more important for achieving the objective and others (many) are not.
OPERATIONS MANAGERS AND DECISION MAKING 6. ETHICS Ethical issues arise in many aspects of operations: worker’s safety- good working environment quality- avoid hidden defects community- good neighbor don’t harm the environment
- don’t do things that will harm the environment
GOODS SERVICES Output Tangible Intangible Uniform Output High Low Labor Content Low High Customer Contact Low High Measure Productivity Easy Difficult Chance to Correct Quality Problem High Low
OPERATIONS MANAGER’S JOB Systems Design how much capacity is needed good location due to lowest cost product design - customer wants work system – productivity layout – arrangement of machines
OPERATIONS MANAGER’S JOB Systems Operations inventory – how much to order Scheduling – who’ll do the job quality control- performance against standard
Why study Prod & Ops Mgt?
POM is at the core of all business organization
50% or more of all jobs are in POM related areas
All other areas of business organization are related to POM
Historical Evolution of Prod & Ops Mgt 1.
2.
3.
4.
INDUSTRIAL REVOLUTION Craft Production- highly skilled worker using simple tools(custom-made) Development of Standard Gauging System- interchageable parts Substitute Machine Power to Human Power Economies of Scale- cost decrease as volume increase
DESCRIPTION CRAFT PRODUCTION 1. high variety customized output 2. Few highly skilled worker to complete entire unit of output MASS PRODUCTION 1. High volume of standard output 2. Division of Labor, specialized equipment, interchageable part.
EXAMPLES OF GOODS & SERVICES CRAFT PRODUCTION Landscaping, Tailoring, Diagnosis and Treatment of injuries, surgery. MASS PRODUCTION Automobile, Computers, mail sorting
ADVANTAGES CRAFT PRODUCTION More choices; tailored to customer needs. MASS PRODUCTION low cost per unit; requires low skilled workers
DISAVANTAGES CRAFT PRODUCTION slow; high cost; requires high skilled workers MASS PRODUCTION rigid system; volume at expense of quality
Historical Evolution of Prod & Ops Mgt SCIENTIFIC MANAGEMENT 1. Taylor’s Best Method of Doing Things-based on observation, measurement, analysis, improvement and economic incentives. (abuse the worker) 2. Henry Ford’s Mass Production: Division of Labor, Interchangeable 3. Workers are Regarded as Robots
Historical Evolution of Prod & Ops Mgt 1. 2.
3.
4.
HUMAN RELATIONS MOVEMENT Lilian Gilbreth- human factors in work Maslov’s Motivational Theoryphysiological, safety, recognition McGregor’s Theory X & Theory Y- how employee view work Ouchi’s Theory Z- lifetime employment, problem solving, consensus
Historical Evolution of Prod & Ops Mgt 1. 2.
MANAGEMENT SCIENCE Quantitative Technique - W W II Use of Computers
Historical Evolution of Prod & Ops Mgt 1. 2.
INFLUENCE OF JAPANESE MFG Started the Quality Revolution Characteristics: Continuous Improvement Worker Empowerment Customer Satisfaction
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
OPERATIONS CORE of business organizations - responsible for creation of goods and services
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
FINANCE Securing resources and allocating them throughout the organization.
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
MARKETING Focus on promotion and selling goods and services.
BUSINESS
F I N A N C E
O P E R A T I O N S
M A R K E T I N G
PURCHASING Procurement of materials, supplies and equipments.
HUMAN RESOURCES Recruitment and training of personnel.
MAINTENANCE Repair of equipment, buildings and grounds.
INDUSTRIAL ENGINEERING Scheduling, performance standard, work methods and quality control.
PUBLIC RELATIONS Maintaining positive public image.
OPERATIONS Activities directly related to producing goods and /or providing services
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
ENVIRONMENT Things that are outside the production system but influences it. 1. CUSTOMERS – changes in needs/wants 2. GOVT REGULATIONS – product safety 3. COMPETITORS – new product 4. TECHNOLOGY - new advances 5. SUPPLIERS – supply and prices 6. ECONOMY - inflation
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
INPUT (M’s) 1. 2. 3. 4. 5.
EQUIPMENT – tools SUPPLY – things CAPITAL – fund LABOR – knowledge & skills TIME – available for operations
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
TRANSFORMATION 1.
ALTER – change into a new form Physical Change – cut, assemble, formed, etc Sensual Change – cold into heat, beauty, music, etc Psychological Change – feeling of worth, feeling of friendship
TRANSFORMATION 2. TRANSPORT – more value if there is change of location
Brought to us – delivery of goods
Removed from us – disposal of waste
TRANSFORMATION 3. STORAGE – keep in safe place Warehouse Bank Day Care Hotel
TRANSFORMATION 4. INSPECTION – evaluate properties before purchase
Safety Certificate Quality Standard Appraisal Value Medical Examination
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
OUTPUT 1. 2.
PRODUCTS – physical goods SERVICES – abstract or nonphysical
All value-adding transformations are services, there may or may not be a set of accompanying facilitating goods.
ENVIRONMENT
INPUT Land, Labor
CONVERSI ON Process
Capital
CONTR OL
OUTPUT Goods Services
MONITORING AND CONTROL MONITORING – must tell the manager when changes(errors) are occurring in any part of production system CONTROL - manager must apply corrective actions to alter the input or transformation system
OPERATIONS MANAGERS AND DECISION MAKING (TOOLS) 1.
MODELS Simplified version of something: PHYSICAL – looks like their real life; miniature cars, airplane,.. SCHEMATIC – less resemblance; pictures, drawings,… MATHEMATICAL- don’t look alike; formulas, symbols, …
OPERATIONS MANAGERS AND DECISION MAKING 1.
MODELS Advantages: Easy to use and less expensive than when dealing with actual bring the power of mathematics Better understanding of the problem
OPERATIONS MANAGERS AND DECISION MAKING 2. QUANTITATIVE APPROACHES Mathematical optimum allocation of scarce resources. Linear Programming, Queuing Techniques, Inventory Models, Forecasting Techniques, PERT-CPM .
OPERATIONS MANAGERS AND DECISION MAKING 3. ANALYSIS OF TRADE-OFF Considers the pros and cons of a certain course of action to determine the consequences of the decision. Example: overtime vs quality inventory vs customer service
OPERATIONS MANAGERS AND DECISION MAKING 4. SYSTEMS APPROACH The whole is greater than the sum of its individual parts. The objective of the organization as a whole takes precedence over those of any one system. example: Optimal solution vs dept/division/plant
OPERATIONS MANAGERS AND DECISION MAKING 5. ESTABLISHING PRIORITIES Certain elements are more importance than others. Effort must be directed where they will do the most good and to avoid wasting time and energy on insignificant elements.
OPERATIONS MANAGERS AND DECISION MAKING 5. ESTABLISHING PRIORITIES example: PARETO PHENOMENON Some things (few) are more important for achieving the objective and others (many) are not.
OPERATIONS MANAGERS AND DECISION MAKING 6. ETHICS Ethical issues arise in many aspects of operations: worker’s safety- good working environment quality- avoid hidden defects community- good neighbor don’t harm the environment
- don’t do things that will harm the environment
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