OPERATIONS MANAGEMENT Introduction to OM

Learning Objectives LO1-1a: Differentiate operations from other functions LO1-1b: Identify the elements and major concepts of operations and supply chain management. LO1-2: Know the differences between goods and services LO1-3: Know the potential career opportunities in operations and supply chain management LO1-4: Evaluate the efficiency of a firm.

OM WARM-UP EXERCISE John, Matt, and Jill are new business graduates. They can’t wait to start their own business: their long-time dream of a sports (bar) restaurant. But they soon figure out that they need to make many decisions to start and run their business . Help them out.

The Hard Rock Cafe First opened in 1971 Rock music memorabilia Now – 129 restaurants in over 40 countries Rock music memorabilia Creates value in the form of good food and entertainment 3,500+ custom meals per day in Orlando How does an item get on the menu? Role of the Operations Manager

WHAT IS OM?- from previous classes - making a business run smoothly, effectively and cost efficiently. Making sure everything in a business coincides. - scheduling, organizing and managing everything that goes into the production process - management of processes, employees, budgets - system best way to allocate business resources for productivity and efficiency overall process of delivering the final product/ service

Why Study OM? 1. OM is one of three major functions of any organization How goods and services are produced? We want to understand what operations managers do OM is such a costly part of an organization

Goods versus Services Goods Services Less interaction with customers can be inventoried Often homogeneous Tangible Pure Goods Core Goods Defined and evaluated as a package of features Cannot be inventoried/time dependent Interaction with customer required Inherently heterogeneous Intangible Core Services Pure Services

A CONTINUUM FROM GOODS TO SERVICES fig_05_03 A CONTINUUM FROM GOODS TO SERVICES

Careers in Operations and Supply Chain Management Plant manager Hospital administrator Branch manager Department store manager Call center manager Supply chain manager Purchasing manager Quality control manager Business process improvement analyst Lean improvement manager Project manager Production control analyst Facilities manager Chief operating officer

Certifications APICS, the American Production and Inventory Control Society American Society of Quality (ASQ) Institute for Supply Management (ISM) Project Management Institute (PMI) Council of Supply Chain Management Professionals Charter Institute of Purchasing and Supply (CIPS)

Options for Increasing Contribution Sales $100,000 $150,000 $100,000 $100,000 Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000 Gross Margin 20,000 30,000 20,000 36,000 Finance Costs – 6,000 – 6,000 – 3,000 – 6,000 Subtotal 14,000 24,000 17,000 30,000 Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500 Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500 Finance/ Marketing Accounting OM Option Option Option Increase Reduce Reduce Sales Finance Production/Operation Current Revenue 50% Costs 50% Costs 20%

Each Section of OSCM: What Is Accomplished?

What Is Operations and Supply Chain Management? The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services Operations and supply chain management (OSCM) is A functional field of business Concerned with the management of the entire production/delivery system

Operations and Supply Chain Processes Manufacturing and service processes used to transform resources into products Processes that move information and material to and from the firm

Process Steps for Men’s Nylon Supplex Parkas

Strategy, Processes, and Analytics Operations and supply chain management involves Product design Purchasing Manufacturing Service operations Logistics Distribution Success depends upon Strategy Processes to deliver products and services Analytics to support the decisions needed to manage the firm

Process Activities Planning – processes needed to operate an existing supply chain Sourcing – selection of suppliers that will deliver the goods and services needed to create the firm’s product Making – producing the major product or service Delivering – logistics processes such as selecting carriers, coordinating the movement of goods and information, and collecting payments from customers Returning – receiving worn-out, excess, and/or defective products back from customers

Operations and Supply Chain Processes

Historical Development of Operations and Supply Chain Management Manufacturing strategy developed Late 1970s Just-in-time (JIT) production pioneered by the Japanese Early 1980s Mid 1980s Service quality and productivity Total quality management (TQM) and Quality certification programs Early 1990s Six-sigma quality Mid 1990s Supply chain management (SCM) Business process reengineering (BPR) Late 1990s Electronic commerce Early 2000s Service science Mid 2010s Business analytics

NEW CHALLENGES / TRENDS IN OM To Global focus/global network Outsourcing / off-shoring/In- sourcing E-business Just-in-time Lean production Supply chain partnering Rapid product development Mass customization Empowered employees/team building Environmental Sustainability/Triple Bottom From Local or national focus In-house Traditional trade/market Batch shipments Mass production Low bid purchasing Lengthy product development Standard products Job specialization Environmental concerns “From” represent the challenges we faced from the beginning of 1980 to 1995, in some cases until 2002. “To” represent what trends we began implementing in the last decade and where we go to.. 30

Current Issues in OSCM Coordinating relationships between members of SC Optimizing global network of suppliers, producers, and distributors Managing customer touch points Raising awareness of OSCM as a competitive weapon Sustainability and triple bottom line

Efficiency, Effectiveness, and Value Doing something at the lowest possible cost Effectiveness Doing the right things to create the most value for your customer Value The attractiveness of a product relative to its cost

Efficiency and Wall Street