OPERATION MANAGEMENT CHAPTER 1 INTRODUCTION

The strategic importance of operations The ability to enter and compete in both new and existing markets is very dependent on operations capabilities.

Characteristics of World Class Organization Mass customization Lean production Agile manufacturing (speed/response in fast moving marketplace). Customer-centric provision / satisfaction Quality (specification/defect/reliability/durability) Cost

Example: 1. Toyota Production System (TPS) perations/toyota-production-system perations/toyota-production-system 2. Dell /manufacturing-operations-management- lessons-from-dell

Operation Management: Definition Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs Transformation process: -can be applied to three main categories – Materials (manufacturing) – customers (services) – Information (services)

The Transformation Process

Transformation process = added value Porter (1985, p. 38) states that: Value is the amount buyers are willing to pay for what an organization provides them … creating value for buyers that exceeds the cost of doing so is the goal of any generic strategy. Value, instead of cost, must be used in analysing competitive position Value added, in most simplistic terms, means that the income or benefit derived from performing a particular operation is greater than the cost of doing so.

Organizing to Produce Goods and Services  Essential functions:  Marketing – generates demand  Production/operations – creates the product  Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

OM: Scope & Responsibilities Ten Decision Areas  Design of goods and services  Managing quality  Process and capacity design  Location strategy  Layout strategy  Human resources and job design  Supply chain management  Inventory management  Scheduling  Maintenance

OM Strategy: The Shift

Three Factors That Drive Change in Operation Management 1.Economic (Wealth) 2.Social (Fashion) 3.Technological (invention) Assignment: Discuss the three factors that drive change in OM. Provides Examples (10 marks) -Length of report: 2- 3 pages -1.5 spacing. Font 12- Times New Roman

New Challenges in OM  Global focus  Just-in-time  Supply chain partnering  Rapid product development, alliances  Mass customization  Empowered employees, teams ToFrom  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