Introduction to Operations Management CHAPTER 1

What is Operations Management?

3 Basic Functions of Business Organizations Ensure and allocating financial resources Produce goods or services Assess consumer needs, and sell / promote goods or services

Operations: A Transformation Process Workers Managers Equipment Facility Materials Land Energy Information Goods Services I nputs Outputs Operations and processes Feedback Performance Lead time The time between ordering a good or service and receiving it.

Operations Management The management of systems or processes that create goods and/or provide services. Planning Coordinating Executing

Operations = Transformation Process Inputs Inputs 5 Ms Management, Methods, Material, Machines, Maintenance Also: Personnel, information & energy Transformation/conversion process Transformation/conversion process Cutting, machining, storing, transporting, investing, analyzing Output Output Goods/services Value-added The difference between the cost of inputs and the value or price of outputs.

Example: Food Processor InputsProcessing Outputs Raw Vegetables Metal Sheets Water Energy Labor Building Equipment Cleaning Making cans Cutting Cooking Packing Labeling Canned vegetables Table 1.2 Consumer Feedback

Example: Hospital InputsProcessing Outputs Table 1.2 Healthy patients Doctors, nurses Hospital Medical Supplies Equipment Laboratories Examination Surgery Monitoring Medication Therapy Improvement of patients health condition

Example: BA 3352 InputsProcessing Outputs Table 1.2 Knowledge Text Book Lecture Notes Handouts Course CD …… Lecturing Tutoring Assignment Exam Future operations managers Teaching Evaluation

Manufacture or Service Operations?

Manufacturing or Service? Tangible Act Production of goodsDelivery of services

Goods-Service Continuum Steel production Automobile fabrication Home remodeling Retail sales Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing High percentage goods Low percentage service Low percentage goods High percentage service Figure 1.3

Manufacturing vs. Service CharacteristicManufacturingService Output Uniformity of output Uniformity (seragam) of input Labor content Measurement of productivity Customer contact Opportunity to correct quality problems before delivery Evaluation Patentable Table 1.3 Tangible High Low Easy Low High Easy Usually Intangible Low High Difficult High Low Difficult Not Usually

Manufacturing vs. Service Employment Service Manufacturing

What does Operations Manager Do?

Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more... Scope of Operations Management

Example: Airline Company Forecasting: Forecasting: Weather, landing conditions, seat demands for flights. Capacity Planning: Capacity Planning: How many number of planes in each route? Scheduling: Scheduling: Scheduling of planes for flights and for routine maintenance, scheduling of pilots and flights attendants. Quality: Quality: Quality of the services, Safety.

Example: Automobile Factory Forecasting: Forecasting: Demands for cars. Capacity Planning : Capacity Planning : Number of shifts, level of workforce. Inventory: Inventory: Various component, parts. Scheduling: Scheduling: Scheduling of various types of cars, Scheduling of workforce. Quality: Quality: Quality of products, services.

Types of Operations OperationsExamples Goods ProducingFarming, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines ExchangeRetailing, wholesaling, banking, renting, leasing, library, loans EntertainmentFilms, radio and television, concerts, recording CommunicationNewspapers, radio and television newscasts, telephone, satellites Table 1.4

Responsibilities of Operations Manager 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 Table 1.6

Why is Operations Management Important?

Reasons to Study Operations Management Operations Management activities are at the core of all business organizations. 50% or more of the jobs in industry are operations management- related: Customer Service Quality Assurance Production Planning Scheduling Inventory Management Logistics All Other Functional Areas are interrelated with Operations Management

Operations as Technical Core Operations Finance Capital Markets, Stockholders Marketing Customers Workers Suppliers Purchasing Personnel

The Overlapping of Three Major Functions Figure 1.5 Operations Finance Marketing Budgeting Economic analysis of investment proposals Provision of funds …… Financial indicators Competitor Customer preference Trend of technology …… Judgment of manufacturability Fulfillment lead time

Interfaces with Other Supporting Functions Purchasing Accounting Personnel/Human resources Public relations Maintenance Industrial engineering Distribution Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS Legal

What are the Operational Decisions?

Key Decisions of Operations Managers What What resources/what amounts When Needed/scheduled/ordered Where Work to be done How Designed Who To do the work

System Design System capacity Location of facilities Arrangement of departments Product and services planning Acquisition and placement of equipment

System Operations involved.. Management of personnel Inventory planning and control Scheduling Project management Quality assurance