1 - 1 Operations Management

1 - 2 What Is Operations Management? Production Production is the creation of goods and services Operations management (OM) Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

1 - 3 Essential Functions 1.Marketing 1.Marketing – generates demand 2.Production/operations 2.Production/operations – creates the product 3.Finance/accounting 3.Finance/accounting – tracks how well the organization is doing, pays bills, collects the money 4.Human Resources 4.Human Resources – provides labor, wage and salary administration and job evaluation

1 - 4 Why Study OM? 1. OM is one of four major functions of any organization, we want to study how people organize themselves for productive enterprise 2.We want (and need) to know how goods and services are produced 3.We want to understand what operations managers do 4.OM is such a costly part of an organization

1 - 5 What Operations Managers Do  Planning  Organizing  Staffing  Leading  Controlling Basic Management Functions

1 - 6 The Decisions 1. Design of goods and services ◦ What good or service should we offer? ◦ How should we design these products and services? 2. Managing quality ◦ How do we define quality? ◦ Who is responsible for quality?

Process and capacity design ◦ What process and what capacity will these products require? ◦ What equipment and technology is necessary for these processes? 4. Location strategy ◦ Where should we put the facility? ◦ On what criteria should we base the location decision?

Layout strategy ◦ How should we arrange the facility? ◦ How large must the facility be to meet our plan? 6. Human resources and job design ◦ How do we provide a reasonable work environment? ◦ How much can we expect our employees to produce?

Supply-chain management ◦ Should we make or buy this component? ◦ Who should be our suppliers and how can we integrate them into our strategy? 8. Inventory, material requirements planning, and JIT ◦ How much inventory of each item should we have? ◦ When do we re-order?

Intermediate and short–term scheduling ◦ Are we better off keeping people on the payroll during slowdowns? ◦ Which jobs do we perform next? 10. Maintenance ◦ How do we build reliability into our processes? ◦ Who is responsible for maintenance?

The Evolution  Division of labor (Adam Smith 1776; Charles Babbage 1852)  Standardized parts (Whitney 1800)  Scientific Management (Taylor 1881)  Assembly line (Ford/ Sorenson 1913)  Gantt charts (Gantt 1916)  Motion study (Frank and Lillian Gilbreth 1922)  Quality control (Shewhart 1924; Deming 1950)

 First Digital Computer (Atanasoff 1938)  CPM/PERT (DuPont 1957, Navy 1958)  Material requirements planning (Orlicky 1960)  Computer aided design (CAD 1970)  Flexible manufacturing system (FMS 1975)  Baldrige Quality Awards (1980)  Computer integrated manufacturing (1990)  Globalization (1992)  Internet (1995)  Mass Customization (2000s)

New Challenges in OM  Global focus  Just-in-time  Supply-chain partnering  Rapid product development, alliances  Mass customization  Empowered employees, teamsToFrom  Local or national focus  Batch shipments  Low bid purchasing  Lengthy product development  Standard products  Job specialization

Characteristics of Goods  Tangible product  Consistent product definition  Production usually separate from consumption  Can be inventoried  Low customer interaction

Characteristics of Service  Intangible product  Produced and consumed at same time  Often unique  High customer interaction  Inconsistent product definition  Often knowledge-based  Frequently dispersed

Recent Trends in OM Ethics Global focus Environmentally sensitive production Rapid product development Mass customization Empowered employees Supply-chain partnering Just-in-time performance

Feedback loop Outputs Goods and services Transformation Economic system transforms inputs to outputs /CONVERSITION PROCESS The Operation System Inputs Labor, capital, management

Operation System – Types

Operation Strategy (OS) Operations strategy is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm’s long-term corporate strategy.

OS addresses How large do we make our facilities? What type of process do we install to make the products or provide services? What will our supply chain look like? What will be the nature of our workforce? How do we ensure quality?

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Factors Affecting Globalization Technology Competitive Priorities  Cost  Quality  Delivery  Flexibility  Service

Supply Chain Management Managing the supply of Inputs to achieve uninterrupted Production system Managing the supply of Outputs to increase the customer value Supply chain management (SCM) is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage

SCN Process

Significance of SCM Maximize customer value Reduce cost Effective production system Competitive advantage Goodwill & Image Market share Lean Manufacturing

Ethics and Social Responsibility Challenges facing operations managers:  Developing and producing safe, quality products  Maintaining a clean environment  Providing a safe workplace  Honoring stakeholder commitments