1. Introduction to Production & Operations Management

2. Management Science …is the study and development of techniques for the formulation and analysis of management and related business problems. Operations research models are often helpful in this process.

3. Operations Research …is the application of techniques developed in mathematics, statistics, engineering and the physical sciences to the solution of problems in business, government, industry, economics and the social sciences.

4. Quantitative Methods …employ mathematical models to reach a wide variety of business decisions. They give modern managers a competitive edge Managers do not need to have great mathematical skills Familiarity allows one to: Ask the right questions Recognize when additional analysis is necessary Evaluate potential solutions Make informed decisions

5. Qualitative Methods …like more traditional methods, however, qualitative methods come in many varieties. Different researchers focus on different sources of data: One's own immediate experience Others' experiences, which we might seek to understand through: their speech or writing, their other behaviors, their products - technology, artwork, footprints, etc.

6. What is POM? Production is the creation of goods and services Production and/or Operations Management are the activities that transform resources into goods and services

7. Why Study POM? It is one of the 3 critical parts of any organization: Marketing – generates demand Operations – creates the product Finance/accounting – tracks organizational performance, pays bills, collects money It shows us how goods and services are produced It shows us what POM managers do It is the most costly part of any organization

8. Cost as a Percentage of Sales MeatFurnitureRestaurantHeavy PackingManufacturing Equipment POM Materials 79%40%38%42% Labor 8152012 Fringes 3221623 Total 90777477 S, G & A 9152220 Int., Taxes, Profits, etc. 1843

9. Jobs in the U.S.

10. Jobs in POM Less than 20% of all jobs are in manufacturing (and they are declining) Almost 80% of jobs are in the service sector (and they are increasing) Nearly half of all jobs are in POM Most POM jobs are professional and/or managerial

11. Chapters Covered in Text Forecasting…………………………… Service, product design…………….. Quality management………………… Process, capacity design…………... Location..………….………………… Layout design ………………………. Human resources, job design…….. Supply-chain management………… Inventory management ……………. Scheduling ………………………….. Maintenance...……………………… Ch. 4 Ch. 5 Ch. 6, 6S Ch. 7, 7S Ch. 8 Ch. 9 Ch. 10, 10S Ch. 11, 11s Ch. 12, 14, 16 Ch. 3, 13, 15 Ch. 17

12. The Critical Decisions Quality management Who is responsible for quality? How do we define quality? Service and product design What product or service should we offer? How should we design these products and services?

13. The Critical Decisions - Continued Process and capacity design What processes will these products require and in what order? What equipment and technology is necessary for these processes? Location Where should we put the facility On what criteria should we base this location decision?

14. The Critical Decisions - Continued Layout design How should we arrange the facility? How large a facility is required? Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce?

15. The Critical Decisions - Continued Supply chain management Should we make or buy this item? Who are our good suppliers and how many should we have? Inventory, material requirements planning, How much inventory of each item should we have? When do we re-order?

16. The Critical Decisions - Continued Intermediate, short term, and project scheduling Is subcontracting production a good idea? Are we better off keeping people on the payroll during slowdowns? Maintenance Who is responsible for maintenance? When do we do maintenance?

17. Significant Events in POM Division of labor (Adam Smith, The Wealth of Nations, 1776) Industrial Revolution Standardization of parts (Eli Whitney, 1765 - 1825) Cotton Gin (1792) Contract with U.S. for muskets (1798) Some doubt about true interchangeability Simeon North (Middletown) John Hall (Harpers Ferry)

18. Significant Events in POM (cont.) Scientific management (Frederick Taylor 1865 - 1915) The Principles of Scientific Management, 1911 Match employees to jobs Provide the proper training Provide the proper methods and tools Establish legitimate incentives

19. Significant Events in POM (cont.) Taylor’s 4 Principles of Scientific Management: Replace rule-of-thumb work methods with methods based on a scientific study of the tasks Scientifically select, train, and develop each worker rather than passively leaving them to train themselves Cooperate with the workers to ensure that the scientifically developed methods are being followed Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks

20. Significant Events in POM (cont.) Coordinated assembly line (Henry Ford 1863 - 1947) Gantt charts (Henry Gantt 1861-1919) Motion studies (Frank and Lillian Gilbreth, 1922) Quality control (Shewhart, Juran, Feigenbaum, Deming, Taguchi, etc.) CAD Flexible manufacturing systems (FMS) Computer integrated manufacturing (CIM)

21. New Challenges in OM Local or national focus Batch shipments Low bid purchasing Lengthy product development cycles Standardized products Job specialization Global focus Just-in-time Supply chain partnering Rapid product development Strategic alliances Mass customization Empowered employees Teams FromTo From To

22. Goods vs. Services

23. Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction © 1995 Corel Corp.

24. Characteristics of Services Intangible product Produced & consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed © 1995 Corel Corp.

25. Goods vs. Services Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service GoodsService Goods Service

26. Goods vs. Services - Continued Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Provider, not product is transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from intangible service GoodsService Goods Service

27. Goods Contain Services / Services Contain Goods 0 2550 75 100 2550 75 100 Automobile Computer Installed Carpeting Fast-food Meal Restaurant Meal Auto Repair Hospital Care Advertising Agency Investment Management Consulting Service Counseling Percent of Product that is a Good Percent of Product that is a Service

28. New Challenges in Operations Management

29. Changing Challenges for the Operations Manager

31. The Productivity Challenge

32. The Economic System Transforms Inputs to Outputs The economic system transforms inputs to outputs at about an annual 2.5% increase in productivity (capital 38% of 2.5%), labor (10% of 2.5%), management (52% of 2.5%) Land, Labor, Capital, Management Goods and Services Feedback loop InputsProcessOutputs

33. Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve Productivity ProductivityProductivity Units produced Input used ==

34. Adam Smith on Productivity …He asserted that ten workers could produce 48,000 pins per day if each of eighteen specialized tasks was assigned to particular workers. Average productivity: 4,800 pins per worker per day. But absent the division of labor, a worker would be lucky to produce even one pin per day.

35. Henry Ford on Productivity …In 1907, Henry Ford announced his goal for the Ford Motor Company: to create "a motor car for the great multitude." At that time, automobiles were expensive, custom-made machines. Ford realized he'd need a more efficient way to produce the Model T in order to lower the price. He and his team looked at other industries and found four principles that would further their goal: Interchangeable parts Continuous flow Division of labor Reducing wasted effort

36. Frank Gilbreth on Productivity …improved a five-thousand-year-old job and had enabled bricklayers to lay brick faster with less effort and fatigue. On one particularly difficult type of wall, where the previous record had been 120 bricks per hour, his methods allowed them to lay 350 bricks, an increase in productivity of over 190%.

37. Walter Shewhart on Productivity …the original notions of Total Quality Management and continuous improvement trace back to a former Bell Telephone employee named Walter Shewhart. One of W. Edwards Deming's teachers, he preached the importance of adapting management processes to create profitable situations for both businesses and consumers, promoting the utilization of his own creation: the SPC chart.

38. Impact of Quality Improvement Parts per man hour 95 100 105 110 115 Year AYear BYear C Cost per unit decreased $1.50 $1.75 $2.00 $2.25 Year AYear BYear C Average worker's annual cash compensation increased 24000 25000 26000 27000 Year AYear BYear C Productivity improved Costs were pared Wages increased

39. Measurement Problems Quality may change while the quantity of inputs and outputs remains constant External elements may cause an increase or decrease in productivity Precise units of measure may be lacking

40. Productivity Increase Labor - contributes about 10% of the annual increase Capital - contributes about 32% of the annual increase Management - contributes about 52% of the annual increase

41. Key Variables for Improved Labor Productivity Basic education appropriate for the labor force Diet of the labor force Social overhead that makes labor available Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge

42. Comparison of Productivity

43. Service Productivity Typically labor intensive Frequently individually processed Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality

44. Current Trends U.S. is becoming more of a knowledge intensive service economy Globalization Total Quality Control Need for flexibility and innovation