Presentation on theme: "Chapter 1 Introduction to Operations Management"— Presentation transcript:
1 Chapter 1 Introduction to Operations Management Why some companies succeedWhile others failWalmart Vs. Sears/JC PennyBoeing missed production deadline …
2 Operations Management Managing that part of the organization responsible for producing goods and servicesManagement of systems or processes that create goods and/or provide servicesOM in the newsProductivityQualityE-businessGlobal CompetitionCustomer ServiceOM AffectsCompanies’ ability to competeNation’s ability to compete internationally
3 An Organization The Three Basic Functions Figure 1.1OrganizationFinanceSecure Fin. ResourcesBudgetingFunding …OperationsProducingMarketingAssess Customer needsSelling & Promoting …An Organization The Three Basic FunctionsWhat is producing?
4 The operations function involves the conversion Value-Added ProcessFigure 1.2The operations function involves the conversionof inputs into outputsInputs* Land* Labor* CapitalTransformation/ConversionprocessOutputsGoodsServicesControl(Measurement)FeedbackValue added
5 Value-added = Value or price of outputs – Cost of inputs Food ProcessorTable 1.2InputsProcessingOutputsRaw VegetablesMetal SheetsWaterEnergyLaborBuildingEquipmentCleaningMaking cansCuttingCookingPackingLabelingCanned vegetablesScraps!Value-added = Value or price of outputs – Cost of inputsWhat about services?
9 Production of Goods vs. Delivery of Services Tangible outputProduction orientedDelivery of servicesAn actYet operations are similar!Service job categoriesGovernmentWholesale/retailFinancial servicesHealthcarePersonal servicesBusiness servicesEducation
10 Goods vs Service Example! Characteristic Goods Service Customer contactLowHighUniformity of inputLabor contentUniformity of outputOutputTangibleIntangibleMeasurement of productivityEasyDifficultOpportunity to correct problemsInventoryMuchLittleEvaluationEasierPatentableUsuallyNot usual
11 Scope of Operations Management ForecastingCapacity planningSchedulingManaging inventoriesAssuring qualityMotivating & Training employeesDeciding where to locate facilitiesSupply chain managementAnd more . . .Example!
12 Types of Operations Table 1.4 Operations Examples Goods Producing Farming, mining, construction manufacturing, power generationStorage/TransportationWarehousing, trucking, mail service, moving, taxis, buses, hotels, airlinesExchangeRetailing, wholesaling, banking, renting, leasing, library, loansEntertainmentFilms, radio and television, concerts, recordingCommunicationNewspapers, radio and television, newscasts, telephone, satellites
13 Decline in Manufacturing Jobs in US! Increase of Service Jobs ProductivityIncreasing productivity allows companies to maintain or increase their output using fewer workersOutsourcingSome manufacturing work has been outsourced to more productive companiesBangladesh!
14 Manufacturing Matters More than half of the total R&D performed is in the manufacturing industriesWhen a California manufacturing job is lost, an average of 2.5 service jobs are lostAccounts for most exportsWhat aboutOutsourcing
15 Managing Services is Challenging Service jobs are often less structured than manufacturing jobsCustomer contact is higherServices hire many low-skill, entry-level workersEmployee turnover is higherInput variability is higherService performance can be affected by worker’s personal factors
16 Operations Management Planning and Decision Making Alternatives & Impact onCostProfitGoalMission, Vision ….Key Decisions of O. ManagersWhat resources/amountsWhen needed/scheduled/orderedWhere work-locationHow Designed/DoneWho workerOperations Management Planning and Decision Making
17 Decision Making of an O. Manager System DesignCapacityLocationArrangement of departmentsProduct and service planningAcquisition and placement of equipmentSystem operationPersonnelInventorySchedulingProject ManagementQuality Assurance
18 Approaches (Make Informed Decision) 1- Models2- Quantitative approaches3- Analysis of trade-offs4- Systems approach5- Establishing prioritiesEthics
20 1- Models Tradeoffs An abstraction of reality. A simplified version (typically)Physical ~ Crash testSchematic ~ BlueprintsMathematical ~ StatisticalTradeoffsModels are not perfectPros and cons of models
21 AdvantagesEasy to use, less expensiveRequire users to organizeIncrease understanding of the problemEnable “what if” questionsConsistent tool for evaluation and standardized formatPower of mathematicsLimitationsQuantitative information may be emphasized over qualitativeModels may be incorrectly applied and results misinterpretedNonqualified users may not comprehend the rules on how to use the modelUse of models does not guarantee good decisions
23 3- Analysis of Trade-Offs Decision on the amount of inventory to stockCustomerLevel of customer serviceCostInventory
24 Systems Approach “The whole is greater than the sum of the parts.” Suboptimization
25 5- 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.How do we identify the vital few?
26 Ethical Issues Consider how a decision will affect Shareholders ~ Financial statementsManagementEmployees ~ Worker safety, Hiring/firing workers, Worker’s rightsCustomer ~ Quality, Product safetyCommunity ~ Closing facilitiesEnvironment ~ Product safety
27 Business Operations Overlap Figure 1.5OperationsMarketingFinance
28 Operations Interfaces Lead timePublic RelationsAccountingProductionOperationsMarketingPersonnelPurchasingDistributionMISLegal
29 Historical Evolution of Operations Management Industrial revolution (1770’s)End of craft productionIntroduction of Machine PowerScientific management (1911) & Ford Model TMass productionInterchangeable partsDivision of laborHuman relations movement ( )~ HawthorneDecision models (1915, ’s)~ IM Models, SPCInfluence of Japanese manufacturers (After WWII)Quality revolutionTable 1.7
30 Trends in Business impacting OM The Internet, e-commerce, e-businessManagement technologyGlobalizationManagement of supply chainsOutsourcingAgilityEthical behaviorOperations strategyWorking with fewer resourcesRevenue managementProcess analysis and improvementIncreased regulation and product liabilityLean production
31 HW-1 | Due Feb 6 Discussion & Review Questions (P26-27) No. 4,5,7,10,15Wegmans Food market (P30-32)Answer Q. No. 2
32 Simple Product Supply Chain Figure 1.7Suppliers’ SuppliersDirect SuppliersProducerDistributorFinalConsumerSupply Chain: A sequence of activitiesAnd organizations involved in producingAnd delivering a good or service
33 A Supply Chain for Bread Stage of ProductionValue AddedValue of ProductFarmer produces and harvests wheat$0.15Wheat transported to mill$0.08$0.23Mill produces flour$0.38Flour transported to baker$0.46Baker produces bread$0.54$1.00Bread transported to grocery store$1.08Grocery store displays and sells bread$0.21$1.29Total Value-Added
34 Learning Objectives Define the term operations management Identify the three major functional areas of organizations and describe how they interrelateCompare and contrast service and manufacturing operationsDescribe the operations function and the nature of the operations manager’s job
35 Learning ObjectivesDifferentiate between design and operation of production systemsDescribe the key aspects of operations management decision makingBriefly describe the historical evolution of operations managementIdentify current trends that impact operations management