Introduction to Operations Management

What is Operations Management? Operations function consists of all activities directly related to producing goods or providing services Production & Operations Management is defined as the design, operation, and improvement of the transformation process, which converts the various inputs into desired outputs of products and services.

Operations as a System Energy Materials Transformation (Conversion) Process Materials Goods or Services Labor Capital Feedback information for control of process inputs and process technology Information

The Product/Process Continuum Automobile retailers Photocopier manufacturers & service providers Banks Consultancies Automobile manufacturers Restaurants Airlines Undertakers Product orientation Process orientation Organizations on a Product/Process Continuum

Manufacturing vs Service Characteristic Manufacturing Service Output Tangible Low High Easy Intangible High Low Difficult Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Opportunity to correct quality problems

Operational Planning & Control Decisions in OM Strategic Tactical Operational Planning & Control

Why Study Operations Management? Systematic Approach to Org. Processes Operations Management Business Education Career Opportunities Cross-Functional Applications

Operations Management Responsibilities of Operations Management • Planning – Capacity Location Make or buy Layout Projects Scheduling Controlling Inventory Quality • Organizing – Degree of centralization – Subcontracting Products and services • Staffing – Hiring/laying off – Use of Overtime • Directing – Incentive plans – Issuance of work orders – Job assignments

Types of Operations Operations Examples Goods Producing Farming, mining, construction , manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites

Steps in the production/operations process from the point of view of an entrepreneur Product/Process Choice Service Operations Management Business Process Outsourcing and Off-shoring Facility Location Planning Facility Layout Planning Facility Capacity Planning Project Management Inventory Management for Independent Demand Items Materials Requirement Planning (MRP)/ Just-In-Time (JIT) System/ Supply Chain Mgt. (SCM) Total Productive Maintenance (TPM)

Steps in the production/operations process from the point of view of an entrepreneur Aggregate Production/ Operations Planning Work Design Operations Scheduling Quality Management Demand Forecasting Operations Strategies

OM in the Organization Chart Finance Marketing Operations Director Plant Manager Operations Manager Manufacturing, Production control, Quality assurance, Engineering, Purchasing, Maintenance, etc 8

Significant Events in OM

THE CHRONOLOGICAL DEVELOPMENT OF OM The Industrial Revolution (late 1700s) Adam Smith: Division of Labour The Evolution of Management Thought birth of mass production Scientific Management (1910s) a technical understanding of work Frederick W. Taylor : Work Study

THE CHRONOLOGICAL DEVELOPMENT OF OM Human Relations Movement :Industrial psychology and industrial sociology (1910s) developing a human understanding of work Hugo Mintsberg Hawthorne studies Statistical control of quality (1930s) Walter Shewhart

THE CHRONOLOGICAL DEVELOPMENT OF OM Management Science (1940s) optimizing the use of limited resources Operations Research Developed new Quantitative Techniques Functionalization of OM (1950s-60s) bringing it all together in one function

THE CHRONOLOGICAL DEVELOPMENT OF OM Computer Age: The MRP (1970s) computerizing operational decision making Materials Requirements Planning JIT, the Quality Revolution and Operations strategy (1980s) Toyota production system operations strategies

THE CHRONOLOGICAL DEVELOPMENT OF OM Japanese Influence: Total Quality Management (1990s) Business Process Reengineering Supply Chain Management E-commerce (2000s)

OPERATIONS MANAGEMENT TIME LINE

Core Services Core services are basic things that customers want from products they purchase 11

Core Services Performance Objectives Quality Flexibility Speed Operations Management Price (or cost Reduction)

Value-Added Services Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way 12

Value-Added Service Categories Problem Solving Information Sales Support Operations Management Field Support

Tradeoffs Models A model is an abstraction of reality. • A model is an abstraction of reality. – Physical Schematic Tradeoffs – Mathematical What are the pros and cons of models?

Trends in OM Service sector growing to 80% of non-farm jobs- See Figure 1-4 Global competitiveness Demands for higher quality Huge technology changes Time based competition Work force diversity

Current Issues in OM Effectively consolidating the operations resulting from mergers Developing flexible supply chains to enable mass customization of products and services Managing global supplier, production and distribution networks Increased “commoditization” of suppliers Customers demand better quality, faster deliveries, and lower costs Increased cross-functional decision making 14

Current Issues in OM (cont’d) Achieving the “Service Factory” Achieving good service from service firms (74% U.S. employment in service sector jobs) Making efficient use of Internet technology (ERP, CRM,SRM) Total quality management (TQM) – TPS “In business today, the emphasis is not so much on what you make, but on how you do business. Dell makes computers just like every other PC manufacturer.” 15