Presentation on theme: "Operations Management"— Presentation transcript:
1 Operations Management Lesson 1Fundamentals of Operations ManagementPrepared by Sudarsan Jayasingh
2 Learning Objectives What you will learn in this unit: Define Operations Management?The role and activities of operation managementThe input-transformation-output modelDifference between goods and servicesWhat is Operations strategyPerformance objectives of operations strategyProductivity Measurement
3 What is Operations Management? “ Operation Management is the set of activities that create goods and services through the transformation of inputs into outputs.”(Slack, 2001)
4 Typical Organization Chart Source: Reid and Sanders, 2005.
5 Activities of Operations manager Understand the operation’s strategic objectivesDeveloping an operation’s strategy for the organizationDesigning the operation’s products, services and processesPlanning and controlling the operationImproving the performance of the operation.
6 Some Activities of Ikea Operations Manager Design elegant products which can be flat packed efficientlyStorageQualityDesign Store LayoutSite Location
7 OM’s Transformation Role Source: Reid and Sanders, 2005.
8 The input-transformation-output model ransformedresourcesMaterialsInformationCustomersGoodsTransformationInputOutputandprocessservicesTransformingresourcesFacilitiesStaffSource: Slack, 2001Reid & Sanders, Operations management, c Wiley 2003
9 InputsTransformed resources – the resources that are treated, transformed or converted in some way. The transformed resources which operations take in are usually a mixture of materials, information and customers.Transforming resources – the resources that act upon the transformed resources. Facilities and staff are the two types of transforming resources. Facilities include building, equipment, plant and process technology etc., Staff includes all those who operate, maintain, plan and manage the operation.
10 The output from most operations is a mixture of goods and services PURE GOODSTangibleCan be storedProduction precedes consumptionCRUDE OIL PRODUCTIONLow customer contactCan be transportedALUMINIUM SMELTINGQuality is evidentSPECIALIST MACHINE TOOLMANUFACTURERRESTAURANTCOMPUTER SYSTEMS SERVICESIntangibleMANAGEMENT CONSULTANCYCannot be storedProduction and consumption are simultaneousPSYCHOTHERAPY CLINICHigh customer contactCannot be transportedQuality difficult to judgePURE SERVICESSource: Slack, 2001
11 Similarities-Service/Manufacturers All use technologyBoth have quality, productivity, & response issuesAll must forecast demandEach will have capacity, layout, and location issuesAll have customers and suppliersAll have scheduling and staffing issues
12 Historical Development of OM Industrial revolution Late 1700sScientific management Early 1900’sHuman relations movement 1930s to 1960sManagement science Mid-1900sComputer age sJust-in-Time Systems (JIT) 1980sTotal quality management (TQM) 1980’sReengineering sFlexibility sTime-Based Competition 1990sSupply chain Management 1990’sGlobal Competition 1990sEnvironmental Issues 1990sElectronic Commerce Late 1990s
13 Today’s OM Environment Customers demand better quality, faster deliveries, and lower costsIncreased cross-functional decision makingRecognized need to better manage information using ERP and CRM systems
14 The activities of operations management ENVIRONMENTINPUT TRANSFORMED RESOURCESMATERIALS INFROMATION CUSTOMERSOPERATIONS STRATEGYIMPROVEMENTDESIGNGOODS AND SERVICESINPUTOUTPUTPLANNING AND CONTROLFACILITIES STAFFINPUT TRASNFORMED RESOURCESENVIRONMENT
15 Highlights OM is function that manages the resources that add value Its role is to transform inputs into products or servicesKey differences between mfg. and service companies are tangibility of product and degree of customer contactHistorical milestones range from 1700s Industrial Revolution to the modern Electronic Commerce ageOM must understand and implement major process changes like JIT, TQM, supply chain management, and environmental changesOM works closely with all other business functions
16 Operations StrategyOperations strategy is the total patterns of decisions and actions which set the role, objectives and activities of the operation so that they contribute to, and support, the organisation’s business strategy
17 Operations Strategy – Designing the Operations Function
18 The Wal-Mart Strategy and Operations Structure Corporate Strategy(Gain competitive advantage by) providing customers access to qualitygoods, when and where needed, at competitive pricesOperations Strategy–Short cycle timesLow inventory levelsOperations StructureEDIFast transportation systemFocused locationsCommunication betweenretail stores
19 Competitive Advantage Competitive advantage is term as the extra edge that a firm has over their industry peers (Reid and Sanders, 2005).The capability of a firm in managing their operation can be transform into their competitive advantage if there can identify and tap into their intangible resources.
20 Competitive Priorities- The Edge Four Important Operations Questions: Will you compete on –Cost?Quality?Time?Flexibility?All of the above? Some? Tradeoffs?Source: Reid and Sanders, 2005.
21 Competitive Priorities- The Edge 0r Performance Objectives QualityTime (Speed and Dependability)FlexibilityCost
22 SpeedCostDepend-abilityFlexibilityQualityLower prices(or higher profits)Faster customer responseError-free products and servicesWider varietyMore customisationMore innovationCope with volume fluctuationsOn-time deliveries
23 Are There Priority Tradeoffs? Which priorities are “Order Qualifiers”?e.g. Must have excellent quality since everyone expects itWhich priorities are “Order Winners”?e.g. Dell competes on all four prioritiesSouthwest Airlines competes on costMcDonald’s competes on consistencyFedEx competes on speedCustom tailors compete on flexibilityCan you have both high quality and low cost?e.g. Yes, Coke and Pepsi are good examplesCan you offer design flexibility and short delivery?e.g. Yes, modular housing manufacturers do it
24 Measuring Productivity Productivity is a measure of how efficiently inputs are converted to outputsProductivity = output/inputTotal Productivity MeasureTotal Productivity = $sales/inputs $Partial Productivity MeasurePartial Productivity = cars/employeeMultifactor Productivity MeasureMulti-factor Productivity = sales/total $costsSource: Reid and Sanders, 2005.
25 HighlightsBusiness Strategy is a long range plan. Functions develop supporting plansStrategy must address mission, environment, and core competenciesBusiness strategy provides a guide for designing operations strategyOperations strategy must consider which competitive priorities are essential to meet business objectivesCompetitive priorities are cost, quality, time, and flexibilityProductivity measures how effectively a firm is using resourcesProductivity is computed as a ratio of outputs divided by inputs
26 ReferencesReid R.D., and Sanders N. R., (2005) Operations Management, 2nd Edition, Wiley Publication.Slacks Nigel and Lewis Mike, (2002) Operations Management, Prentice Hall.