Introduction to Operations Management Assoc. Prof. Mustafa Yüzükırmızı

1-2 You should be able to: LO 1.1Define the terms operations management and supply chain LO 1.2Identify similarities and differences between production and service operations LO 1.3Explain the importance of learning about operations management LO 1.4Identify the three major functional areas of organizations and explain how they interrelate LO 1.5Summarize the two major aspects of process management LO 1.6Describe the operations function and the nature of the operations manager’s job LO 1.7Explain the key aspects of operations management decision making LO 1.8Briefly describe the historical evolution of operations management LO 1.9Describe the current issues in business that impact operations management LO 1.10Explain the need to manage the supply chain

1-3 Operations? The part of a business organization that is responsible for producing goods or services Operations management? The management of systems or processes that create goods and/or provide services LO 1.1

1-4 Suppliers’ suppliers Suppliers’ suppliers Direct suppliers Direct suppliers Producer Distributor Final Customers Final Customers Supply Chain – a sequence of activities and organizations involved in producing and delivering a good or service LO 1.1

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1-6 Inputs Land Labor Capital Information Inputs Land Labor Capital Information Outputs Goods Services Outputs Goods Services Transformation/ Conversion Process Transformation/ Conversion Process Control Measurement and Feedback Measurement and Feedback Measurement and Feedback Value-Added Feedback = measurements taken at various points in the transformation process Control = The comparison of feedback against previously established standards to determine if corrective action is needed. 1-6

1-7 Automobile Assembly, Steelmaking Products are typically neither purely service- or purely goods- based. GoodsServices Home Remodeling, Retail Sales Computer Repair, Restaurant Meal Songwriting, Software Development Surgery, Teaching LO 1.2

1-8 Every aspect of business affects or is affected by operations Many service jobs are closely related to operations Financial services Marketing services Accounting services Information services Through learning about operations and supply chains you will have a better understanding of: The world you live in The global dependencies of companies and nations Reasons that companies succeed or fail The importance of working with others LO 1.3

1-9 a. Forecasting and capacity planning to match supply and demand. b. Process management. c. Managing variations. d. Monitoring and controlling costs and productivity. e. Supply chain management. f. Location planning, inventory management, quality control, and scheduling. training, human resource management, customer service, equipment repair, procurement, and administrative services

1-10 Finance & Operations Budgeting Economic analysis of investment proposals Provision of funds Marketing & Operations Demand data Product and service design Competitor analysis Lead time data LO 1.4

1-11 Process - one or more actions that transform inputs into outputs Three Categories of Business Processes: Upper-management processes These govern the operation of the entire organization. Operational processes These are core processes that make up the value stream. Supporting processes These support the core processes. LO 1.5

1-12 The variety of goods or services being offered. The greater the variety of goods and services, the greater the variation in production or service requirements. Structural variation in demand. These variations, which include trends and sea- sonal variations, are generally predictable. They are particularly important for capacity planning. Random variation. This natural variability is present to some extent in all processes, as well as in demand for services and products, and it cannot generally be influenced by managers. Assignable variation. These variations are caused by defective inputs, incorrect work methods, out-of-adjustment equipment, and so on. This type of variation can be reduced or eliminated by analysis and corrective action.

1-13 Forecasting such things as weather and landing conditions, seat demand for flights, and the growth in air travel. Capacity planning, essential for the airline to maintain cash flow and make a reasonable profit. (Too few or too many planes, or even the right number of planes but in the wrong places, will hurt profits.) Locating facilities according to managers’ decisions on which cities to provide ser- vice for, where to locate maintenance facilities, and where to locate major and minor hubs. Facilities and layout, important in achieving effective use of workers and equipment. Scheduling of planes for flights and for routine maintenance; scheduling of pilots and flight attendants; and scheduling of ground crews, counter staff, and baggage handlers. Managing inventories of such items as foods and beverages, first-aid equipment, in- flight magazines, pillows and blankets, and life preservers. Assuring quality, essential in flying and maintenance operations, where the emphasis is on safety, and important in dealing with customers at ticket counters, check-in, telephone and electronic reservations, and curb service, where the emphasis is on efficiency and courtesy. Motivating and training employees in all phases of operations.

1-14 The Operations Function consists of all activities directly related to producing goods or providing services. A primary function of the operations manager is to guide the system by decision making. System Design Decisions System Operation Decisions LO 1.6

1-15 Most operations decisions involve many alternatives that can have quite different impacts on costs or profits Typical operations decisions include: What: What resources are needed, and in what amounts? When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? Where: Where will the work be done? How: How will he product or service be designed? How will the work be done? How will resources be allocated? Who: Who will do the work? LO 1.7

1-16 Modelling, Quantitative methods, Performance Metrics Analysis of trade-offs, Degree of Customization Establishing priorities, ethics, and The systems approach

1-17 Performance Metrics All managers use metrics to manage and control operations Profits Costs Quality Productivity Flexibility Inventories Schedules Forecast accuracy Analysis of Trade-Offs A trade-off is giving up one thing in return for something else Carrying more inventory (an expense) in order to achieve a greater level of customer service LO 1.7

1-18 Industrial Revolution Scientific Management Human Relations Movement Decision Models and Management Science Influence of Japanese Manufacturers LO 1.8

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1-20 Economic conditions Innovating Quality problems Risk management Competing in a global economy LO 1.9

1-21 In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems: Oscillating inventory levels Inventory stockouts Late deliveries Quality problems LO 1.10

The need to improve operations 2. Increasing levels of outsourcing 3. Increasing transportation costs 4. Competitive pressures 5. Increasing globalization 6. Increasing importance of e-business 7. The complexity of supply chains 8. The need to manage inventories LO 1.10

1-23 Illustrate the supply chain for a university Draw a picture of the supply chain Among the responsibilities are forecasting, process management, inventory management, scheduling, quality assurance, and maintenance: a. What kinds of things would likely require forecasts? b. Describe a process and make an illustration. c. What inventory items does a university probably have? Name one inventory decision a manager has to make periodically. d. What scheduling must be done? What things might occur to disrupt schedules and cause departments to reschedule? e. How important is quality assurance to a university’s business? Explain. f. What kinds of maintenance must be performed?

1-24 All managers have to cope with variation. a. What are the major sources of variation that a university has to contend with? b. How might these sources of variation impact a university’s ability to match supply and demand? c. What are some ways that can be coped with variation? If a university is thinking of making some of its operations sustainable, what are some ideas she might consider?