1. Introduction

What is Operations Management? Management of the conversion process which transforms inputs such as raw material and labor into outputs in the form of finished goods and services Operations Management Inputs (customers and/or materials) Outputs (goods and services)

Position of Operations Management Management Industrial Engineering Operations Management

Role of OM within an Organization MarketingOperations Finance/ Accounting Functional Area Missions Organizations Mission

Marketing Sales promotion Advertising Sales Market research Operations Facilities Construction; maintenance Production and inventory control Scheduling; materials control Quality assurance and control Supply chain management Manufacturing Tooling; fabrication; assembly Design Product development and design Detailed product specifications Industrial engineering Efficient use of machines, space, and personnel Process analysis Development and installation of production tools and equipment Finance/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall Manufacturing

Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange Airline Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising

Operations Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Finance Investments Security Real estate Accounting Auditing Marketing Loans Commercial Industrial Financial Personal Mortgage Trust Department Commercial Bank

Important Topics in OM Forecasting--determining what the future holds in terms of product demand, raw material prices, etc. Quality Management/Quality Control-- making certain that the products and services provided are of the highest possible integrity

Important Topics in OM (Continued) Just-In-Time Production (JIT)--minimizing waste, in-process inventories and maximizing flexibility Material Requirements Planning (MRP)-- getting the right parts to the right place at the right time

Important Topics in OM (Continued) Scheduling--planning the production of goods and services in the most efficient possible way Technology--exploring uses of technology and automation in manufacturing and providing of services Supply Chain Management / Logistics

Characteristics of Products 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

Products and Services

A Mix of Goods and Services

New Trends in OM Local or national focus Reliable worldwide communication and transportation networks Global focus, moving production offshore Batch (large) shipments Short product life cycles and cost of capital put pressure on reducing inventory Just-in-time performance Low-bid purchasing Supply chain competition requires that suppliers be engaged in a focus on the end customer Supply chain partners, collaboration, alliances, outsourcing PastCausesFuture

Lengthy product development Shorter life cycles, Internet, rapid international communication, computer- aided design, and international collaboration Rapid product development, alliances, collaborative designs Standardized products Affluence and worldwide markets; increasingly flexible production processes Mass customization with added emphasis on quality Job specialization Changing socioculture milieu; increasingly a knowledge and information society Empowered employees, teams, and lean production PastCausesFuture

Low-cost focus Environmental issues, ISO 14000, increasing disposal costs Environmentally sensitive production, green manufacturing, recycled materials, remanufacturing Ethics not at forefront Businesses operate more openly; public and global review of ethics; opposition to child labor, bribery, pollution High ethical standards and social responsibility expected PastCausesFuture

Measuring Improvement - Productivity Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)Output Labor + Material + Energy + Capital + Miscellaneous Productivity =

Example Staff of 4 works 8 hrs/day 8 items/day Payroll cost = $640/day Overhead = $400/day 8 items/day 32 labor-hrs = labor productivity =.25 items/labor-hr 8 items/day $ = multifactor productivity =.0077 items/dollar

Productivity at Starbucks Stop requiring signatures on credit card purchases under $25 Saved 8 seconds per transaction Change the size of the ice scoop Saved 14 seconds per drink New espresso machinesSaved 12 seconds per shot A team of 10 analysts continually look for ways to save time. Some improvements:

Starbucks Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years. Productivity has improved by 27%, or about 4.5% per year.

Productivity at Taco Bell Revised the menu Designed meals for easy preparation Shifted some preparation to suppliers Efficient layout and automation Training and employee empowerment Preparation time cut to 8 seconds Stores handle twice the volume with half the labor

Video Case Study Identify how OM decisions are applied at Hard Rock Cafe. 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 How would you determine the productivity of the kitchen staff?