1. © Wiley 20051 Chapters 1+2 - Introduction to Operations Management Operations Management by R. Dan Reid & Nada R. Sanders 2 nd Edition © Wiley 2005 PowerPoint Presentation by R.B. Clough - UNH

2. © Wiley 20052 What is Operations Management? The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services

3. © Wiley 20053 Typical Organization Chart

4. © Wiley 20054 Business Information Flow

5. © Wiley 20055 OM’s Transformation Role

6. © Wiley 20056 Productivity

7. © Wiley 20057 Differences between Manufacturers and Service Operations Services: Intangible product Service cannot be inventoried High customer contact Short response time Labor intensive Manufacturers: Tangible product Product can be inventoried Low customer contact Longer response time Capital intensive

8. © Wiley 20058 Service and 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

9. © Wiley 20059 Trends in OM Service sector growing to 80% of non-farm jobs- See Figure 1-4 Global competitiveness Demands for higher quality Huge technology changes Time based competition Work force diversity

10. © Wiley 200510 OM Decisions

11. © Wiley 200511 Operations Management Decisions Strategic: Product/Service Design Process Selection Capacity Planning Facility Location Facility Layout Job Design Tactical: Quality Control Demand Forecasting Supply Chain Management Production Planning Inventory Control Scheduling

12. © Wiley 200512 Business/Functional Strategy

13. © Wiley 200513 Operations Strategy – Designing the Operations Function

14. © Wiley 200514 Competitive Priorities- The Edge Four Important Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?

15. © Wiley 200515 Competing on Cost? Typically high volume products Often limit product range & offer little customization May invest in automation to reduce unit costs Can use lower skill labor Probably use product focused layouts

16. © Wiley 200516 Competing on Quality? High performance design: Superior features, high durability, & excellent customer service Product & service consistency: Meets design specifications Close tolerances Error free delivery

17. © Wiley 200517 Competing on Time? Fast delivery: Focused on shorter time between order placement and delivery On-time delivery: Deliver product exactly when needed every time Rapid development speed Using concurrent processes to shorten product development time

18. © Wiley 200518 Competing on Flexibility? Product flexibility: Easily switch production from one item to another Easily customize product/service to meet specific requirements of a customer Volume flexibility: Ability to ramp production up and down to match market demands

19. © Wiley 200519 Productivity

20. © Wiley 200520 Measuring Productivity Productivity is a measure of how efficiently inputs are converted to outputs Productivity = output/input Total Productivity Measure Productivity relative to all inputs Partial Productivity Measure Productivity relative to a single input (e.g., labor hours) Multifactor Productivity Measure Productivity relative to a subgroup of inputs (e.g., labor and materials)

21. © Wiley 200521 Labor Productivity Example: Assume two workers paint twenty-four tables in eight hours: Inputs: 16 hours of labor (2 workers x 8 hours) Outputs: 24 painted tables

22. © Wiley 200522 Multifactor Productivity Convert all inputs & outputs to $ values Example (labor and materials productivity): 200 units produced that sell for $12.00 each Materials cost $6.50 per unit 40 hours of labor were required at $10 an hour

23. © Wiley 200523 Interpreting Productivity Measures Is the productivity measure of 1.41 in the previous example good or bad? Can’t tell without a reference point Compare to previous measures (e.g.: last week) or to another benchmark

24. © Wiley 200524 Productivity Growth Rate Can be used to compare a process’s productivity at a given time (P 2 ) to the same process’ productivity at an earlier time (P 1 )

25. © Wiley 200525 Productivity Growth Rate Example: Last week a company produced 150 units using 200 hours of labor This week, the same company produced 180 units using 250 hours of labor

26. © Wiley 200526 Productivity Example - An automobile manufacturer has presented the following data for the past three years in its annual report. As a potential investor, you are interested in calculating yearly productivity and year to year productivity gains as one of several factors in your investment analysis. 2003 2002 2001 Labor Productivity Unit Car Sales/Employee 24.1 21.2 18.3 Year-to-year Improvement 13.7% 15.8% Total Productivity Total Cost Productivity 1.26 1.24 1.19 Year-to-year Improvement 1.6% 4.2% Which is the best measurement? 200320022001 Unit car sales 2,700,0002,400,0002,100,000 Employees112,000113,000115,000 $ Sales (billions$) $49,000$41,000$38,000 Cost of Sales (billions) $39,000$33,000$32,000

27. © Wiley 200527 Homework Ch. 2 Problems: 1, 5, 6, 8, 9.