3 Production Vs Operation The term Production is used mainly for organizations that are involved in manufacturing of goods, such as automobiles, electronics, garments or foot wear etc.Also called manufacturing process.The term Operations is used for organizations that provide service to others e.g. FedEx delivers 5.5 million packages each day with sales of $26 billion each year.Also called service process.
4 Operations Management Operation Management deals with processes.What is a Process?Any activity or group of activities that takes one or more inputs, transforms them and provides one or more outputs for its customers.
5 What is a Process (cont’d….) Fundamental activities that organizations use to produce goods and to provide services and achieve goals.E.g. FedEx must receive packages from customers, sort them by destiny, move them to the required destination by air or ground transportation, keep track of their progress and bill the customer for the service.
6 The Process View External environment Internal and external customers Processes and operations12345InputsWorkersManagersEquipmentFacilitiesMaterialsLandEnergyOutputsGoodsServicesInformation on performanceFigure 1.1
7 The Process ViewProcess is much broader then the boundaries of departments within an organization.A single process may involve work flow that spread across many departments. E.g. at Serena hotels various departments and activities coordinate to serve their guests such as, reservation, Reception, baggage collection, room services, food & beverages, House keeping, laundry, restaurants and billing & accounts department etc.Effectiveness of any organizations is actually due to the effectiveness of its processes.
8 Nested ProcessesPlanning and controlling for processes of any service or manufacturing firm is very complicated, as a single process may consist of many different activities or actions performed by various department or person.A single process may be broken down into sub processes which can be broken down into further.The concept of a process within a process is called NESTED PROCESS.
9 Service Vs Manufacturing Processes Service processPhysical, durable outputOutput can be inventoriedLow customer contactLong response timeCapital intensiveQuality easily measuredIntangible, perishable outputOutput cannot be inventoriedHigh customer contactShort response timeLabor intensiveQuality not easily measuredFigure 1.2
10 Process across the organization FinanceAcquires financial resources and capital for inputsMarketingGenerates sales of outputsOperationsTranslates materials and service into outputsSupport FunctionsAccountingInformation SystemsHuman ResourcesEngineeringMaterial & Service InputsSales RevenueProduct & Service OutputsFigure 1.3
11 Operations Management The systematic design, direction, and control of processes that transform inputs into useful services & products for internal, as well as external customers.
12 Operations Management Activities that relate to the creation of goods and services through the transformation of inputs into outputs.The field of OM is multidimensional constantly changing.
13 Scope of Operations Management Planning for operationsProduct & Service DesignQualityInventoryCostFacility LocationFacility LayoutMaterialsProduction PlanningForecastingMaterial PlanningSchedulingSupply Chain ManagementTechnologyPlanning for Manpower
14 Operation Management Processes as Value chain Processes can be linked together to form a value chain – interrelated processes within a firms and across different departments that produce a service or product to the satisfaction of the customers.
15 Value Chain View Core Processes Support Processes External suppliers External customersInbound LogisticsoperationsOutbound logisticsMarketing,Sales and ServicesCore ProcessesFigure 1.4
16 Value Chain Core processes & Support processes Core processes are sets of activities that deliver value to external customersInbound LogisticsOperationsOutbound LogisticsMarketing/Sales & ServicesSupport processes provide vital resources and support to the core processes
17 Support Processes TABLE 1.1 | EXAMPLES OF SUPPORT PROCESSES Capital acquisitionThe provision of financial resources for the organization to do its work and to execute its strategyBudgetingThe process of deciding how funds will be allocated over a period of timeRecruitment and hiringThe acquisition of people to do the work of the organizationEvaluation and compensationThe assessment and payment of people for the work and value they provide to the companyHuman resource support and developmentThe preparation of people for their current jobs and future skills and knowledge needsRegulatory complianceThe processes that ensure that the company is meeting all laws and legal obligationsInformation systemsThe movement and processing of data and information to expedite business operations and decisionsCorporate and functional managementThe systems and activities that provide strategic direction and ensure effective execution of the work of the business
19 Customer Supplier relationship Internal &external SupplierInternal SupplierThe employees or processes that supply important information or materials to a firm’s processes.External SupplierThe businesses or individuals who provide the resources, services, products and materials for the firm’s needs.Internal & External CustomerInternal customerOne or more employees that rely on inputs from other employees in order to perform their workExternal customerA customer who is either an end user or a business user, buying the firm’s products and services.
20 Historical Development of Operation Management The modern OM has gone through a long evolution process over more than a century and has taken the shape of how we know it today.Here are some important milestones and developments in the field of OM over the years.
21 Historical Development of OM Early 1900s – 1940s:The era of industrial revolution and inventions. Focus was on identifying ways to produce on a large scale at minimum cost. Focus on Quality control and mass inspection was an important development in 1930s.Most important concepts of this era are:Scientific Management by Fredrick TaylorTime and Motion studyActivity scheduling chart (GANTT Chart)Quality Control by using inspection statistical product controlHawthorne studies of worker motivation
22 Late 1950s – early 1960s:The specific concept of operations management was introduced. Scholars identified the commonalities of all production systems and emphasized the important of viewing production operations as a system.Most important concepts of this era are:PERT ChartDecision TheoryCritical path method (CPM)Mathematical Programming models
23 1970s:Introduction of computer technology in business operations. Proves to be a new revolution in OM.Most important concepts of this era are:ForecastingScheduling techniquesInventory ControlProject ManagementService Quality & productivity
24 1980s:This era marks the development of manufacturing strategy paradigm by the researcher of Harvard Business School. Use of sophisticated computer technology for manufacturing and operations.Just in Time philosophyFactory AutomationRobots (CIM)CAD/CAM
25 1990s:Major development of this era is TQM. Development of industry standards for quality ISO 9000 certification standards created by International Organization for Standardization.TQMProcess Re-engineeringSupply Chain ManagementElectronic enterprise (Internet)SAP/Oracle software2000s:Enterprise Resource Planning (ERP)E-commerce