1. Fundamentals of Operations Management BUS 3 – 140 Mr. Jess Marino Fall, 2007

2. Page 2 2 Agenda –Introduction –Green Sheet review and other administrative items –Additional comments on the course –Initial Lecture

3. Introduction

4. Page 4 4 Marino Background Academics Supply Chain Experience –Graduate in Production and Operations Management –Product of CSU system (San Diego State) –Developed and presented several courses as a Management Consultant –Over 25 years as a practitioner at all levels of responsibility  Leadership in small and large organizations  Many different hourly and professional jobs  Over eight years as a Management Consultant –Certified in Production and Operations Management by the Association for Operations Management (APICS) –Exposure to many industries and organizations –Have done business in 13 countries throughout the world

5. Page 5 5 Positions Held Machine Operator Production Expediter Mail Room Clerk Warehouse Clerk Production Supervisor Buyer Production Controller Material Controller Stockroom Manager Production Control Manager Director of Materials Executive Director of Fulfillment Director of Supply Chain Management Director of Operations

6. Page 6 6 Have conducted Business in 13 Countries, Worldwide UNITED STATES CANADA MEXICO ENGLAND SCOTLAND FRANCE HOLLAND HONG KONG CHINA TAIWAN SINGAPORE MALAYSIA THAILAND

7. Green Sheet Review

8. Page 8 8 Student Information Sheet NAME MAJOR (and Emphasis) CURRENT JOB (Company Optional) PREVIOUS SUPPLY CHAIN JOBS / EXPEIRIENCE OTHER

9. Page 9 9 Course Overview and Objectives –Understanding how the Operations function interrelates with other functional organizations in a business –Understanding how an organization uses its resources, processes, data, and technologies to create goods and provide services to customers –Understanding how operational effectiveness can be a critical success factor in determining an organization’s Revenue, Profitability, and Shareholder return –Understanding the managerial responsibility for Operations, even when production is outsourced, or done in regions far from corporate headquarters

10. Page 10 10 Student Learning Objectives for the Course –Understand how Operations is relevant to all functions of a business –Understand Operations Management and how it fits within the overall organization strategy, objectives, and competitiveness –Develop an interest in Operations and apply that understanding, whether in a manufacturing or service career

11. Course Introduction

12. Page 12 12 Operations is a Key Element of a Supply Chain Revenue Utilization of Assets (People, Plant, Equip) Cash Inventory BALANCING keeping Customers completely satisfied and Resources optimally utilized ……. against spending the least amount of Cash and carrying the least amount of Inventory

13. Page 13 13 Scope of this Course Customer Demand Production Scheduling Materials Mgmt Production Shipping Customer Service Forecasting Aggregate Planning Strategic Capacity Planning Demand & Supply Matching Scheduling Just In Time (JIT) Project Mgmt Inventory Mgmt MRP ERP Process Layout Work System Design Lean Operations Quality

14. Introduction to Operations Management

15. Page 15 15 Highest Level Operations Management Process (Fig 1.2) There is a CONVERSION that takes Information, Intelligence, Resources, and Activities and turns them into something VALUABLE to Customers and / or Society Inputs Process (Transformation) Outputs Control Feedback * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

16. Page 16 16 Inputs / Process / Outputs (Table 1.1) * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

17. Page 17 17 Operations are managed for both Production and Services Inputs Process Outputs Raw vegetables Metal sheets Water Energy Labor Building Equipment Cleaning Making cans Cutting Cooking Packing Labeling Canned Vegetables PRODUCTION Inputs Process Outputs Doctors, nurses Hospital Medical supplies Equipment Laboratories Examination Surgery Monitoring Medication Therapy SERVICE Treated Patients Food processing Plant Hospital Result is TANGIBLE OUTPUT Result implies an ACT

18. Page 18 18 Differences between Goods and Service (Book Table 1.3) * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

19. Page 19 19 Goods and Services continuum (Fig 1.3) * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

20. Page 20 20 Combination of Production and Service * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin 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

21. Page 21 21 Manufacturing Jobs U.S. Manufacturing vs. Service Employment 0 10 20 30 40 50 60 70 80 90 4550556065707580859095000205 Year Percent Mfg. Service > 70% Greater PRODUCTIVITY allows for increased output with fewer workers Many manufacturing jobs have moved OFFSHORE to lower labor cost areas * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

22. How Operations Interacts with Other Organizations

23. Page 23 23 Key intersections with Sales & Marketing and with Finance FINANCE & ACCOUNTING –Budgeting –Authorizing Capital spending –Authorizing major inventory buys –Cost accounting –Make vs. Buy decisions –Location planning –Managing international trade –Analyzing trade-off decisions

24. Page 24 24 Key intersections with Sales & Marketing and with Finance SALES & MARKETING –Forecasting Demand –Influencing demand –Committing supply –Negotiating schedules with customers –Providing competitive information –Requesting new products and services –Opening new markets

25. Page 25 25 Interaction with other Functional Organizations

26. Competitiveness, Strategy, and Productivity

27. Page 27 27 Strategy Terms Mission The reason for existence for an organization Mission Statement States the purpose of an organization Goals Provide detail and scope of mission Strategies Plans for achieving organizational goals Tactics The methods and actions taken to accomplish strategies * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

28. Page 28 28 How terms have meaning to the business Mission Goals Organizational Strategies Functional Goals Finance Strategies Marketing Strategies Operations Strategies Tactics Operating procedures * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

29. Page 29 29 Competitiveness World Class Operations enable companies to gain a COMPETITVE ADVANTAGE over others trying to serve the same customers and markets The three biggest levers are: Cost Quality and Reliability Assurance of Supply

30. Page 30 30 How Operations impacts Competitiveness –Cost –Quality –Product design –Response Time –Flexibility –Scalability –Service –Location

31. Page 31 31 Factors that impact Operations Strategy The strategy is tied to where a COMPETITIVE EDGE can be gained or maintained

32. Page 32 32 Operations Strategies vary by mission of the Business (2.4) * From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

33. Page 33 33 Operations Strategies can also vary by Industry QUALITY QUANTITY DELIVERY SERVICEPRICE Relative weight and importance can vary. For some Items and Industries, it can be primarily Price; for others Delivery, etc QUALITY QUANTITY DELIVERY SERVICEPRICE QUALITY QUANTITY DELIVERY SERVICEPRICE QUALITY QUANTITY DELIVERY SERVICEPRICE

34. Page 34 34 Productivity Productivity is a RATIO of Inputs and Outputs Productivity = Output Input Inputs and Outputs can be measured at different degrees Output LaborMachineCapitalEnergy Goods or services produced All inputs used to produce them Partial Measures Multifactor Measures Total Measure Output Labor + Machine Output Labor + Capital + Energy

35. Page 35 35 Additional Productivity Terms Performance to a Standard (e.g. Time to assemble a Computer, PO’s placed per hour, etc.) Emphasis is Value-Added activities Efficiency Per cent of time that is devoted to Value-Added activities Utilization Efficiency * Utilization Productivity The Contribution that the activity / department provides to the overall mission of the business Effectiveness

36. Page 36 36 Steps for Improving Productivity –Measure key outputs and indicators –Analyze the production system as a whole –Benchmark Best In Class processes within and across industries –Solicit ideas from everyone in the organization –Set achievable, stretch goals –Ensure executive supporrt –Measure the improvements –Publicize the improvements