BA240: Operations Management Overview Manufacturing & Services Process Mapping The Role of Technology POM Software Demo Measuring Productivity Exercises

What is Operations Management? Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.

What is a Transformation Process? A transformation process is defined as a user of resources to transform inputs into some desired outputs.

Transformations Physical -- manufacturing Locational -- transportation Exchange -- retailing Storage -- warehousing Physiological -- health care Informational -- telecommunications

Value-Added The difference between the cost of inputs and the value or price of outputs. Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Value added

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

Business Operations Overlap Operations Finance Marketing

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

OM Decisions 1.Product / Service Design 2.Quality Management 3.Process Strategy / Capacity Planning 4.Location Strategies 5.Layout Strategies 6.Human Resources 7.Supply Chain Management 8.Inventory Management 9.Scheduling 10.Maintenance

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

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

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

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

Manufacturing or Service? Tangible Act

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

Productivity –A measure of the effective use of resources, usually expressed as the ratio of output to input Productivity ratios are used for –Planning workforce requirements –Scheduling equipment –Financial analysis

Productivity Partial measures – output/(single input) Multi-factor measures – output/(multiple inputs) Total measure – output/(total inputs) Productivity= Outputs Inputs

Productivity Growth Current Period Productivity – Previous Period Productivity Previous Period Productivity Productivity Growth =

Measures of Productivity Partial Output Output Output Output measures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them

Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Energy Productivity Units of output per dollar input Dollar value of output per dollar input Capital Productivity Units of output per machine hour machine hour Machine Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Labor Productivity Examples of Partial Productivity Measures

Factors Affecting Productivity CapitalQuality TechnologyManagement

Standardization Quality Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers Other Factors Affecting Productivity

Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity Other Factors Affecting Productivity

Bottleneck Operation Machine #2 Bottleneck Operation Bottleneck Operation Machine #1 Machine #3 Machine #4 10/hr 30/hr

Improving Productivity Develop productivity measures Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Get management support Measure and publicize improvements Don’t confuse productivity with efficiency