Chapter One Introduction to Operations Management

Management 3620Chapter 1 Introduction to Operations Management1-2 Back to Basics What is the objective for any business? How is profit determined? Profit=revenue-cost

Management 3620Chapter 1 Introduction to Operations Management1-3 What is the Operations Function in an Organization? The operations function is responsible for the the creation of goods and services Alternatively, the operations function transforms a set of inputs into a set of outputs The operations function exists in some form in all firms

Management 3620Chapter 1 Introduction to Operations Management1-4 Marketing Operations Finance Business Operations Overlap

Management 3620Chapter 1 Introduction to Operations Management1-5 Types of Operations OperationsExamples Goods ProducingFarming, mining, construction, manufacturing, power generation Storage/TransportationWarehousing, 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

Management 3620Chapter 1 Introduction to Operations Management1-6 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

Management 3620Chapter 1 Introduction to Operations Management1-7 The Model Applied to a Food Processor Inputs Transformation /Processing Outputs Canned vegetables Packing Cleaning Making cans Cutting Cooking Labeling Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Management 3620Chapter 1 Introduction to Operations Management1-8 Inputs Transformation /Processing Outputs Healthy patients Doctors Nurses Staff Building Medical Supplies Equipment Laboratories Examination Surgery Monitoring Medication Therapy The Model Applied to a Hospital

Management 3620Chapter 1 Introduction to Operations Management1-9 Stage of Production Value Added Value of Product Farmer produces and harvests wheat$0.15 Wheat transported to mill$0.08$0.23 Mill produces flour$0.15$0.38 Flour transported to baker$0.08$0.46 Baker produces bread$0.54$1.00 Bread transported to grocery store$0.08$1.08 Grocery store displays and sells bread$0.21$1.29 Total Value-Added$1.29

Management 3620Chapter 1 Introduction to Operations Management1-10 Operations Interfaces Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS

Management 3620Chapter 1 Introduction to Operations Management1-11 Operations System Design Decisions concerning –capacity –location –arrangement of work areas –product and service planning –acquisition and placement of processes

Management 3620Chapter 1 Introduction to Operations Management1-12 Operations System Operation Decisions concerning –personnel –inventory –scheduling –project management –quality –assurance

Management 3620Chapter 1 Introduction to Operations Management1-13 Major Characteristics of Operations Systems Degree of standardization /customization Type of operation –Project –Job shop –Repetitive production –Continuous processing

Management 3620Chapter 1 Introduction to Operations Management1-14 Tangible Act Manufacturing or Service?

Management 3620Chapter 1 Introduction to Operations Management1-15 Steel production Automobile fabrication House building Road construction Dressmaking Farming Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing Low service content High goods content High service content Low goods content Increasing goods content Increasing service content Goods-service continuum

Management 3620Chapter 1 Introduction to Operations Management1-16 Opportunity to correctHighLow quality problems Measurement of productivityEasyDifficult Uniformity of outputHighLow Labor contentLowHigh Uniformity of inputHighLow Customer contactLowHigh OutputTangibleIntangible CharacteristicManufacturingService High Key Differences Between Service and Manufacturing Operations

Management 3620Chapter 1 Introduction to Operations Management1-17 What Does the Manager of the Operations Function Do? Makes and implements decisions regarding the design, operation and control of the operations system Applies analyses and tools to enhance the performance measures for the operations system

Management 3620Chapter 1 Introduction to Operations Management1-18 Products and services Planning – Capacity – Location – – Make or buy – Layout – Projects – Scheduling Controlling – Inventory – Quality Organizing – – Degree of centralization Subcontracting Staffing – Hiring/laying off – Use of Overtime Directing – – – Incentive plans Issuance of work orders Job assignments Responsibilities of Operations Management

Management 3620Chapter 1 Introduction to Operations Management1-19 A model is an abstraction of reality. – Physical – Schematic – Mathematical What are the pros and cons of models? Tradeoffs Models

Management 3620Chapter 1 Introduction to Operations Management1-20 Suboptimization A Systems Approach to Decision Making A system is a set of interrelated parts that must work together The whole is greater than the sum of the parts

Management 3620Chapter 1 Introduction to Operations Management1-21 Quantitative Approaches to Decision Making Linear programming Queuing techniques Inventory models Project models Statistical models

Management 3620Chapter 1 Introduction to Operations Management1-22 A vital few things are important for reaching an objective or solving a problems 80/20 Rule – 80% of problems are caused by 20% of the activities How do we identify the vital few? Pareto Phenomenon

Management 3620Chapter 1 Introduction to Operations Management1-23 Recent Trends The Internet E-Business Supply Chain Management

Management 3620Chapter 1 Introduction to Operations Management1-24 Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer A Simple Product Supply Chain

Management 3620Chapter 1 Introduction to Operations Management1-25 Continuing Trends Quality and process improvement Technology Globalization Operations strategy Environmental issues