1 AN OVERVIEW

2 IntroductionIntroduction l l Operations management is the management of an organization’s productive resources or its production system. l l A production system takes inputs and converts them into outputs. l l The conversion process is the predominant activity of a production system. l l The primary concern of an operations manager is the activities of the conversion process.

3 The Operations Function Marketing Marketing MIS Engineering HRM QA Accounting Accounting Sales Finance OM

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5 Primary Topics in Operations Management

6 Primary Topics in Operations Management (cont.)

7 Historical Events in Operations Management EraEvents/ConceptsDatesOriginator Industrial Revolution Steam engine1769 James Watt Division of labor1776 Adam Smith Interchangeable parts1790 Eli Whitney Scientific Management Principles of scientific management 1911 Frederick W. Taylor Time and motion studies1911 Frank and Lillian Gilbreth Activity scheduling chart1912 Henry Gantt Moving assembly line1913 Henry Ford

8 Historical Events in Operations Management (cont.) EraEvents/ConceptsDatesOriginator Human Relations Hawthorne studies1930Elton Mayo Motivation theories 1940sAbraham Maslow 1950sFrederick Herzberg 1960sDouglas McGregor Operations Research Linear programming1947George Dantzig Digital computer1951Remington Rand Simulation, waiting line theory, decision theory, PERT/CPM 1950s Operations research groups MRP, EDI, EFT, CIM 1960s, 1970s Joseph Orlicky, IBM and others

9 Historical Events in Operations Management (cont.) EraEvents/ConceptsDatesOriginator Quality Revolution JIT (just-in-time)1970sTaiichi Ohno (Toyota) TQM (total quality management) 1980s W. Edwards Deming, Joseph Juran Strategy and operations 1990s Wickham Skinner, Robert Hayes Business process reengineering 1990s Michael Hammer, James Champy

10 Historical Events in Operations Management (cont.) EraEvents/ConceptsDatesOriginator GlobalizationWTO, European Union, and other trade agreements 1990s 2000s Numerous countries and companies Internet Revolution Internet, WWW, ERP, supply chain management 1990sARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, PeopleSoft E-commerce2000sAmazon, Yahoo, eBay, and others

11 Today's Factors Affecting OM l l Global Competition l l Quality, Customer Service, and Cost Challenges l l Rapid Expansion of Advanced Technologies l l Continued Growth of the Service Sector l l Scarcity of Operations Resources l l Social-Responsibility Issues

12 Operations as a System InputsInputsOutputsOutputs ConversionSubsystemConversionSubsystem Production System ControlSubsystemControlSubsystem

13 Inputs of an Operations System l l External l l Legal, Economic, Social, Technological l l Market l l Competition, Customer Desires, Product Info. l l Primary Resources l l Materials, Personnel, Capital, Utilities

14 Conversion Subsystem l l Physical (Manufacturing) l l Locational Services (Transportation) l l Exchange Services (Retailing) l l Storage Services (Warehousing) l l Other Private Services (Insurance) l l Government Services

15 Outputs of an Operations System l l Direct l l Products l l Services l l Indirect l l Waste l l Pollution l l Technological Advances

16 Production as an Organization Function l l Companies cannot compete with marketing, finance, accounting, and engineering alone. l l We focus on OM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside. l l To succeed, a firm must have a strong operations function teaming with the other organization functions.

17 Decision Making in OM l l Strategic Decisions l l Operating Decisions l l Control Decisions

18 Strategic Decisions l l These decisions are of strategic importance and have long-term significance for the organization. l l Examples include deciding: l l the design for a new product’s production process l l where to locate a new factory l l whether to launch a new-product development plan

19 Operating Decisions l l These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. l l Examples include deciding: l l how much finished-goods inventory to carry l l the amount of overtime to use next week l l the details for purchasing raw material next month

20 Control Decisions l l These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. l l Examples include deciding: l l labor cost standards for a new product l l frequency of preventive maintenance l l new quality control acceptance criteria

21 What Controls the Operations System? l l Information about the outputs, the conversions, and the inputs is fed back to management. l l This information is matched with management’s expectations l l When there is a difference, management must take corrective action to maintain control of the system