1. FUNDAMENTALS OF OPERATIONS MANAGEMENT
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

2. OUTLINE What is Operations Management?
Managing Operations (design, operating, improvement)
Process, Elements of Process
Process Analysis
Performance Measures to Analyze Processes
Key Issues in Operations Management
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

3. What Is Operations Management?
Management of all OPERATIONS which transform inputs such as raw material and labor into outputs in the form of finished goods and services.
Fundamentals of Operations Management 4e

4. Examples of Production Systems (Systems consist of a set of interacting components operating together to achieve a common goal)
Production as a system
Whole is worth more than the sum of its parts. 6
Introduction 6

5. Examples of Transformation are:
The Economic System
Inputs
Labor, capital, management
Transformation (Process)
Examples of Transformation are:
Storage
Transportation
Machining
Outputs
Goods and services
Feedback loop
Figure 1.6

6. Elements of a Process Inputs: labor, material, energy and capital,
Outputs: Goods or services (cost, quality, timeliness)
Transformation: The essence of operations function is to add value during the transformation process. Value is the difference between the cost of intputs and the value or price of outputs.
Typical value-added operations are: manufacturing, transportation, retailing.
Many studies have shown that we only add value to a product for less than 5% of the time, the rest of the time is wasted
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

7. The Material Flow Cycle
Cycle time
95% 5%
Input Wait for Wait to Move Wait in queue Setup Run Output
inspection be moved time for operator time time
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8. Differences Between Goods and Services
Tangible
Can be inventoried
No interaction between customer and process
Production can be automated easily
Services
Intangible
Cannot be inventoried
Direct interaction between customer and process
Knowledge intensive, not easy to automate
Exhibit 1.7
1-6
Fundamentals of Operations Management 4e

9. Basic Business Functions
Essential functions:
Marketing – generates demand
Production/operations – creates the product
Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
Human Resources – provides labor, employs, assigns and gives training.

10. Role of OM within an Organization
Exhibit 1.1
Fundamentals of Operations Management 4e

11. Top-down Approach to OM Strategy
Operations Strategy Decisions
Strategic (long-range)
Facility Location, Long-Range Capacity Planning
Tactical (medium-range)
Facility Layout, Acquisition of
resources
Operational planning and control (short-range)
Scheduling work-force and
machinery
Fundamentals of Operations Management 4e

12. Why Study OM?
OM is one of four major functions of any organization, we want to study how people organize themselves for productive enterprise
We want (and need) to know how goods and services are produced
We want to understand how operations managers can analyze the processes and improve their performance
OM is such a costly part of an organization that it offers lots of strategies for for performance improvement.

13. NEW TRENDS AND ISSUES IN OM
Increased Global Competition
Increased emphasis on logistics
Advances in Information Technology
Mass Customization
Lean manufacturing, Agility
Automated Manufacturing Technologies
Environmentally Sensitive Production and Ethical Behavior
Fundamentals of Operations Management 4e

14. GLOBALIZATION CAN TAKE PLACE BY
Selling in foreign markets
Producing in foreign lands
Purchasing from foreign suppliers
Partnering with foreign firms
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

15. Some Multinational Companies
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

16. Differentiation – better, or at least different
Strategies to gain Competitive Advantage in this ever changing business environment
Differentiation – better, or at least different
Cost leadership – cheaper
Response – more responsive

17. Ten Critical Decisions Made by Operations Managers to operate these systems
1. Design of goods and services
2. Quality Management
3. Process Design and Capacity Planning
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply-chain management
8. Inventory management
9. Production Planning and Scheduling
10. Maintenance

18. WHY & HOW TO STUDY AN INDUSTRIAL SYSTEM
Measure/estimate performance, Improve operation
Prepare for failures
System
Experiment
with the
actual system
Experiment with
a physical model
of the system
Experiment with a
Model of the system
Mathematical
Models
Simulation

19. MATHEMATICAL MODEL
Model is an abstract and simplified representation of a system, when developing models,
Make sure to include:
Important components of the system
AND
Make sure to state:
Assumptions/approximations about how the system works

20. Model Classifications
Linear vs. nonlinear
Static vs. dynamic
Deterministic vs. probabilistic (stochastic)
Prescriptive vs. descriptive
Discrete vs. continuous
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21. The Management Science Process to Study a System
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

22. Managing Operations Require three general categories of decisons:
Design Choices (Choice of process, technology, equipment, layout, capacity)
Operating Decisions (scheduling, setting batch size, inventory management)
Improvement Decisions (improving productivity, quality, cost, delivery performance)
Note that, variability and uncertainity in the inputs, in the transformation process and in the outputs increase the complexity of managing an operation.
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

23. Productivity: Definition
Productivity is the relationship between the outputs generated from a system and the inputs that are used to create those outputs. Mathematically:

24. Systems Concept inputs outputs Customers transformations Land Goods
people
capital
facilities
equipment
tools
energy
materials
information
Goods
and
services
SYSTEM O I
productivity

25. Productivity Improvement
Productivity Improvement (PI) is the result of managing and intervening in transformation or work processes.
PI will occur if:

26. productivity, efficiency, and effectiveness. Many people confuse. . .
The concepts of
productivity,
efficiency,
and effectiveness.

27. Efficiency
Measures the resources expected to be consumed as compared to the resources actually consumed.
Hence, it focuses on the input side of the system. (Doing the things right)

28. Effectiveness
Measures what the system sets out to accomplish (objective) with what was actually accomplished; plan vs. actual
Hence, effectiveness is an output measure. (Is the output “right” - right quality, right quantity, on time, etc.)
Shortly, effectiveness means doing the right thing.

29. Productivity and Efficiency
Productivity-- a broader concept than efficiency;
It refers to effective use of a given set of resources
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

30. What are the factors that affect productivity?
Training
Methods
Technology
Management

31. How can productivity be raised?
Training can improve the knowledge and skills of staff. Improved recruitment and selection may have the same effect.
Investment in equipment and new technology may enable output per worker to increase.
Better employee motivation can be the most powerful factor of all. Gaining engagement and loyalty of staff can  bring major gains in output and quality.
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

32. Single and Multi-Factor Productivity
Single-factor Output Output Output Output measures Labor Machine Capital Energy
All-factors Output
measure All inputs

33. Single Factor Productivity
Single-factor Output Output Output Output measures Labor Machine Capital Energy
If only one product is produced, the numerator can be either the total units of the product or the total $ value of the product.
If several products are produced, the numerator is the total $ value of all products.
The denominator can be the units of input or the total $ value of input.

34. Example: Single Factor Productivity
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
What is the
labor productivity?

35. Example: Labor Productivity
10,000 units / 500hrs = 20 units/hr
(10,000 units * $10/unit) / 500hrs = $200/hr
10,000 units / (500hrs * $9/hr) = 2.2 unit/$
(10,000 units * $10/unit) / (500hrs * $9/hr) =
The last one is unit-less

36. Example: Multi-Factor Productivity
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $30,000
Overhead: $15,500

37. Example : Multi-Factor Productivity
Output
Labor + Materials + Overhead
MFP =
(10,000 units) * ($10)
(500)*($9) + ($30,000) + ($15,500)
MFP =
MFP = $2.0/1$

38. Roy D. Shapiro, Core Reading: Process Analysis, HBP No
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

39. Roy D. Shapiro, Core Reading: Process Analysis, HBP No
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

40. Roy D. Shapiro, Core Reading: Process Analysis, HBP No
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).

41. Roy D. Shapiro, Core Reading: Process Analysis, HBP No
Roy D. Shapiro, Core Reading: Process Analysis, HBP No (Boston: Harvard Business School Publishing, 2013).