1 - 1© 2011 Pearson Education 1 1 Introduction to Operations Management PowerPoint presentation to accompany Heizer and Render Operations Management, 10e, Global Edition Principles of Operations Management, 8e, Global Edition PowerPoint slides by Jeff Heyl

1 - 2© 2011 Pearson Education Why Study OM? 1.OM is one of three major functions of any organization, we want to study how people organize themselves for productive enterprise 2.We want (and need) to know how goods and services are produced 3.We want to understand what operations managers do 4.OM is such a costly part of an organization

1 - 3© 2011 Pearson Education Ten Critical Decisions Ten Decision AreasChapter(s) 1.Design of goods and services5 2.Managing quality6, Supplement 6 3.Process and capacity 7, Supplement 7 design 4.Location strategy8 5.Layout strategy9 6.Human resources and 10 job design 7.Supply-chain 11, Supplement 11 management 8.Inventory, MRP, JIT12, 14, 16 9.Scheduling13, Maintenance17 Table 1.2

1 - 4© 2011 Pearson Education Goods and Services Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counseling Percent of Product that is a GoodPercent of Product that is a Service 100% % |||||||||

1 - 5© 2011 Pearson Education Ethics and Social Responsibility Challenges facing operations managers:  Developing and producing safe, quality products  Maintaining a clean environment  Providing a safe workplace  Honoring stakeholder commitments

Scope of Operations Management The operations function includes many interrelated activities such as: Forecasting Capacity planning Facilities and layout Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more... The scope of operations management ranges across the organization. 1-6 Student Slides

Role of the Operations Manager The Operations Function consists of all activities directly related to producing goods or providing services. A primary function of the operations manager is to guide the system by decision making. – System Design Decisions – System Operation Decisions Student Slides 1-7

Why Study OM? Every aspect of business affects or is affected by operations Many service jobs are closely related to operations – Financial services – Marketing services – Accounting services – Information services There is a significant amount of interaction and collaboration amongst the functional areas It provides an excellent vehicle for understanding the world in which we live Student Slides 1-8

OM and Supply Chain Career Opportunities Operations manager Supply chain manager Production analyst Schedule coordinator Production manager Industrial engineer Purchasing manager Inventory manager Quality manager Student Slides 1-9

Historical Evolution of OM Industrial Revolution Scientific Management Human Relations Movement Decision Models and Management Science Influence of Japanese Manufacturers Student Slides 1-10

Key Issues for Operations Managers Today Economic conditions Innovating Quality problems Risk management Competing in a global economy 1-11 Student Slides

The Need for Supply Chain Management In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems: – Oscillating inventory levels – Inventory stockouts – Late deliveries – Quality problems Student Slides 1-12

13 What is Operations Management? “ Operation Management is the set of activities that create goods and services through the transformation of inputs into outputs.” (Slack, 2001)

14 Typical Organization Chart Source: Reid and Sanders, 2005.

15 Activities of Operations manager Understand the operation’s strategic objectives Developing an operation’s strategy for the organization Designing the operation’s products, services and processes Planning and controlling the operation Improving the performance of the operation.

16 Design elegant products which can be flat packed efficiently Design Store Layout Site Location Storage Quality Some Activities of an Operations Manager

The input-transformation-output model Transformation process InputOutput Goods and services Transformed resources Materials Information Customers Transforming resources Facilities Staff Source: Slack, 2001

18 Similarities-Service/Manufacturers All use technology Both have quality, productivity, & response issues All must forecast demand Each will have capacity, layout, and location issues All have customers and suppliers All have scheduling and staffing issues

19 Historical Development of OM Industrial revolutionLate 1700s Scientific managementEarly 1900’s Human relations movement1930s to 1960s Management scienceMid-1900s Computer age1970s Just-in-Time Systems (JIT)1980s Total quality management (TQM)1980’s Reengineering 1990s Flexibility1990s Time-Based Competition1990s Supply chain Management1990’s Global Competition1990s Environmental Issues1990s Electronic CommerceLate 1990s

20 Today’s OM Environment Customers demand better quality, faster deliveries, and lower costs

21 Competitive Priorities- The Edge Four Important Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs? Source: Reid and Sanders, 2005.

22 Speed Cost Depend- ability FlexibilityQuality Lower prices (or higher profits) Faster customer response Error-free products and services Wider variety More customisation More innovation Cope with volume fluctuations On-time deliveries

23 Are There Priority Tradeoffs? Which priorities are “Order Qualifiers”? e.g. Must have excellent quality since everyone expects it Which priorities are “Order Winners”? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonald’s competes on consistency FedEx competes on speed Custom tailors compete on flexibility Can you have both high quality and low cost? e.g. Yes, Coke and Pepsi are good examples Can you offer design flexibility and short delivery? e.g. Yes, modular housing manufacturers do it

24 Measuring Productivity Productivity is a measure of how efficiently inputs are converted to outputs Productivity = output/input Total Productivity Measure Total Productivity = $sales/inputs $ Partial Productivity Measure Partial Productivity = cars/employee Multifactor Productivity Measure Multi-factor Productivity = sales/total $costs Source: Reid and Sanders, 2005.

25 Highlights Business Strategy is a long range plan. Functions develop supporting plans Strategy must address mission, environment, and core competencies Business strategy provides a guide for designing operations strategy Operations strategy must consider which competitive priorities are essential to meet business objectives Competitive priorities are cost, quality, time, and flexibility Productivity measures how effectively a firm is using resources Productivity is computed as a ratio of outputs divided by inputs

26 References Reid R.D., and Sanders N. R., (2005) Operations Management, 2 nd Edition, Wiley Publication. Slacks Nigel and Lewis Mike, (2002) Operations Management, Prentice Hall.

OM – Add Value Finance – Allocation of resources – Invest for expansion – Increase profitability Marketing – Find info what customer wants – Redesign existing product/make new Importance of new product-why fb keeps on changing layout 27

Synergy: 1+1=more than 2 : whole is more than the sum of parts OM – How can we improve systems 28

Production is creation of Goods/Services OM – Match employee to right job – Provide training/feedback/incentive/motivation Innovation in products and processes often depends on advances in the physical science e.g Glass 29

If units produced=1000 & labour hr used=250, then productivity measurement=1000/250=4units/labour hr Don’t just this number but also quality If productivity goes down, understand why. E.g no electricity 30

Attract +retain global talent How many people/machine do you need. Need it all the time? Coca-cola is a global product. Does that mean that it is formulated in the same way throughout the world? Purchasing technology by acquiring firm 31

Supply Chain Make/Buy Decision Outsourcing Many vs few suppliers Real time tracking (inventory/location) Fed ex – use barcode – track shipment 32

Job Design & Work Measurement HR – Work schedule (flexi time/week) Job design/expansion/rotation/ Enrichment/enlargement. Employee empowerment Work environment (noise/dust etc) are incentives matched How much time it takes to complete task – industry standard OM – Mutual trust – employee commitment 33

Ergonomics: The study of human interface Some operations can not afford to have any down time – financial services – online financial information OM – RISK TAKER ? 34