Operations Managment

Introduction to Operations Management

Operations Management The management of systems or processes that create goods and/or provide services Organization

Finance

Operations

Marketing

Introduction to Operations Management • Operations Management includes: – Forecasting – Capacity planning – Scheduling – Managing inventories – Assuring quality – Motivating employees – And more . . .

Business Operations Overlap

Operations

Marketing

Finance

Goods-service continuum Steel production Automobile fabrication House building Low service content Road construction

High goods content

Dressmaking Farming Auto Repair Appliance repair

Increasing goods content

Maid Service Manual car wash

Increasing Teaching service content Lawn mowing High service content Low goods content

Introduction to Operations Management Value Added

Value of Product

Farmer produces and harvests wheat

$0.15

$0.15

Wheat transported to mill

$0.08

$0.23

Mill produces flour

$0.15

$0.38

Flour transported to baker

$0.08

$0.46

Baker produces bread

$0.54

$1.00

Bread transported to grocery store

$0.08

$1.08

Grocery store displays and sells bread

$0.21

$1.29

Total Value-Added

$1.29

Stage of Production

Types of Operations Operations Goods Producing

Examples

Farming, mining, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites

Value-Added The difference between the cost of inputs and the value or price of outputs.

Value added Inputs Land Labor Capital

Transformation/ Conversion process

Outputs Goods Services

Feedback

Control Feedback

Feedback

Food Processor Inputs Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Processing

Outputs

Cleaning Making cans Cutting Cooking Packing Labeling

Canned vegetables

Introduction to Operations Management

Hospital Process Inputs Doctors, nurses Hospital Medical Supplies Equipment Laboratories

Processing

Outputs

Examination Surgery Monitoring Medication Therapy

Healthy patients

Introduction to Operations Management

Operations Interfaces Industrial Engineering

Distribution

Maintenance MIS

Public Relations

Operations

Purchasing Accounting

Personnel

Introduction to Operations Management

Decision Making System Design – capacity – location – arrangement of departments – product and service planning – acquisition and placement of equipment

Introduction to Operations Management

Decision Making System operation personnel inventory scheduling project management – quality assurance – – – –

Introduction to Operations Management

Major Characteristics of Production Systems Degree of standardization Type of operation – – – –

project job shop repetitive production continuous processing

Introduction to Operations Management

Manufacturing or Service?

Tangible

Act

Introduction to Operations Management

Key Differences • • • • • •

Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Quality assurance

These differences are beginning to fade in many cases

Introduction to Operations Management

Manufacturing vs Service Characteristic

Manufacturing Service

Output

Tangible

Customer contact

Low

High

Uniformity of input

High

Low

Labor content

Low

High

Uniformity of output

High

Low

Measurement of productivity

Easy

Difficult

Opportunity to correct quality problems

High

Low

High

Intangible

Introduction to Operations Management

Responsibilities of Operations Management Planning – Capacity – Location – Products & services – Make or buy – Layout – Projects – Scheduling Controlling – Inventory – Quality

Organizing – Degree of centralization – Subcontracting Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments

Introduction to Operations Management

Models A model is an abstraction of reality. – Physical – Schematic – Mathematical

Tradeoffs

What are the pros and cons of models?

Introduction to Operations Management

Systems Approach “The whole is greater than the sum of the parts.”

Suboptimization

Introduction to Operations Management

Quantitative Approaches • Linear programming • Queuing Techniques • Inventory models • Project models • Statistical models

Introduction to Operations Management

Pareto Phenomenon • A vital few things are important for reaching an objective or solving a problem. • 80/20 Rule - 80% of problems are caused by 20% of the activities.

How do we identify the vital few?

Introduction to Operations Management

Recent Trends • The Internet • E-Business • Supply Chain Management

Introduction to Operations Management

Simple Product Supply Chain

Suppliers’ Suppliers

Direct Suppliers

Producer

Distributor

Final Consumer

Introduction to Operations Management

Continuing Trends • Quality and process improvement • Technology • Globalization • Operations strategy • Environmental issues