Operations Management Introduction Chapter 1 Prepared by : Shatina Saad
1-1
OPM 533
Outline ♦
WHAT IS OPERATIONS MANAGEMENT?
♦
ORGANIZING TO PRODUCE GOODS AND SERVICES
♦
WHY STUDY OM?
♦
WHAT OPERATIONS MANAGERS DO
♦
WHERE ARE THE OM JOBS?
♦
OPERATIONS IN THE SERVICE SECTOR
♦
EXCITING NEW TRENDS IN OPERATIONS MANAGEMENT
♦
THE PRODUCTIVITY ISSSUE
Prepared by : Shatina Saad
1-2
OPM 533
Learning Objectives When you complete this chapter, you should be able to : Identify or Define: ♦ ♦ ♦ ♦
Production and productivity Operations Management (OM) What operations managers do Services
Describe or Explain: ♦
♦ ♦
Career opportunities in operations management The future of the discipline Measuring productivity
Prepared by : Shatina Saad
1-3
OPM 533
What Is Operations Management? Production is the creation of goods and services Operations managemen management t is is the set of activities that creates value in the form of goods and services by transforming inputs into outputs Prepared by : Shatina Saad
1-4
OPM 533
Significant Events in OM Division of labor (Smith, 1776) ♦ Standardized parts (Whitney, 1800) ♦ Scientific management (Taylor, 1881) ♦ Coordinated assembly line (Ford 1913) ♦ Gantt charts (Gantt, 1916) ♦ Motion study (the Gilbreths, 1922) 1-5 ♦
Prepared by : Shatina Saad
OPM 533
Significant Events Continued CPM/PERT (Dupont, 1957) ♦ MRP (Orlicky, 1960) ♦ CAD ♦ Flexible manufacturing systems (FMS) ♦ Manufacturing automation protocol (MAP) ♦ Computer integrated manufacturing (CIM) 1-6 ♦ Enterprise Resource Planning ♦
Prepared by : Shatina Saad
OPM 533
T e Econom c ys tem Transforms Inputs to Outputs Inpu ts
Process
Outputs
Land, Labor, Capital, Managem ent
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% Feedback loop of 2.5%)
Goods and Services
Prepared by : Shatina Saad
1-7
OPM 533
Characteristics of Goods Tangible product ♦ Consistent product definition ♦ Production usually separate from consumption ♦ Can be inventoried ♦ Low customer interaction ♦
Prepared by : Shatina Saad
© 1995 Corel Corp.
1-8
OPM 533
Characteristics of Service Intangible product ♦
Produced & consumed at same time ♦ Often unique ♦ High customer interaction ♦ Inconsistent product definition ♦ Often knowledgebased 1-9 Frequently dispersed ♦
© 1995 Corel Corp.
Prepared by : Shatina Saad
OPM 533
Goods Versus Services Goods Service ♦ Can be resold ♦
Reselling unusual ♦ Difficult to inventory ♦ Quality difficult to measure ♦ Selling is part of service ♦
Can be inventoried
Some aspects of quality measurable ♦ Selling is ♦
Prepared by : Shatina Saad
1-10
OPM 533
Goods Versus Services - Continued Goods Service ♦ Product is transportable ♦ Site of facility important for cost
Provider, not product is transportable ♦ Site of facility important for customer contact ♦ Often easy to ♦ Often difficult to automate automate ♦ Revenue ♦ Revenue generated primarily from 1-11 generated tangible primarily from Prepared by : Shatina Saad
♦
OPM 533
Organizing to Produce Goods and Services ♦
Essential functions: Marketing – generates demand ♦ Operations –creates the product ♦ Finance/accounting – tracks organizational performance, pays bills, collects money ♦
Prepared by : Shatina Saad
1-12
OPM 533
Functions - Bank Commercial Bank © 1984-1994 T/Maker Co.
Marketing
Teller Scheduling
Prepared by : Shatina Saad
Operations
Check Clearing
Finance/ Accounting
Transactions Processing
1-13
Security
OPM 533
Functions Manufacturer Manufacturing
Marketing
Operations
Manufacturing Production Control
Prepared by : Shatina Saad
1-14
Quality Control
Finance/ Accounting
Purchasing
OPM 533
Organizational Charts Commercial Bank Operations Teller Scheduling Check Clearing Transactions processing Facilities design/layout Vault operations Maintenance Prepared by : Shatina Saad Security
Finance Investmen ts Security Real Estate Accounti
ng
Marketing Loans Commercial Industrial Financial Personal Mortgage
Auditing Trust Department 1-15
OPM 533
Organizational Charts Manufacturing Operations
Finance & Accounting
Facilities: Construction:maintenance
Production & inventory control Scheduling: Scheduling: materials control
Supply-chain management Manufacturing Tooling, fabrication,assembly
Design Product development and design Detailed product specifications
Industrial engineering Efficient use of machines, space, and personnel
Process analysis Development and installation of production tools and equipment Prepared by : Shatina Saad
1-16
Disbursements/cr edits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issues
Marketi ng Sales promotio ns Advertisi ng Sales Market research
OPM 533
Why Study OM? OM is one of three major functions (marketing, (marketing, finance, and operations) operations) of any organization. ♦ We want (and (and need ) to know how goods and services are produced. ♦ We want to understand what operations managers do. ♦ OM is such a costly part of an 1-17 ♦
Prepared by : Shatina Saad
OPM 533
What Operations Managers Do Plan - Organize - Staff Staff Lead - Control
Prepared by : Shatina Saad
1-18
OPM 533
Where Are the OM Jobs?
Technology/methods ♦ Facilities/space utilization ♦ Strategic issues ♦ Response time ♦ People/team development ♦ Customer service ♦ Quality ♦ Cost reduction ♦ Inventory reduction ♦ Productivity improvement ♦
Prepared by : Shatina Saad
1-19
OPM 533
Productivity Measure of process improvement ♦ Represents output relative to input ♦
Units produced Productivity = Input used ♦
Only through productivity increases can our standard of living improve
Prepared by : Shatina Saad
1-20
OPM 533
Multi-Product Productivity Productivity
=
Output Labor + material + energy + capital + misc
Prepared by : Shatina Saad
1-21
OPM 533
Measurement Problems Quality may change while the Quality may quantity of inputs and outputs remains constant ♦ External elements may cause an increase or decrease in productivity ♦ Precise units of measure may be lacking ♦
Prepared by : Shatina Saad
1-22
OPM 533
Productivity Variables Labor - contributes about 10% Labor of the annual increase ♦ Capital Capital -- contributes about 32% of the annual increase ♦ Management Management -- contributes about 52% of the annual increase ♦
Prepared by : Shatina Saad
1-23
OPM 533
ar a es or Key Var 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 1-24 ♦
Prepared by : Shatina Saad
OPM 533
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 ♦
Prepared by : Shatina Saad
1-25
OPM 533
New Challenges in OM From ♦ Local or national focus ♦ Batch shipments ♦ Low bid purchasing ♦
To ♦ Global focus ♦ Just-in-time ♦
Rapid product development, alliances ♦ Mass customization ♦ Empowered employees, ♦
Lengthy product development Prepared by : Shatina Saad
Supply chain partnering
1-26
OPM 533
Past
ang ng a enges for the Operations Manager
Local or national focus Batch (la large) shipments Low-bid purchasing Lengthy product development
Causes
Low-cos ost, t, reliableworl orldw dwide communic icatio ionand transport rtatio ionnetworks Cos ost t of capital puts pressureon reducin ingin investmentin in inventory Quali lity emphasis is requir ires that suppli liers be engagedin product improvement Shorter li life cycle cycles, rapid internatio ional communication, computer-a -aid ided desig ign, and international col olllaboration
Prepared by : Shatina Saad
1-27
Future
Glob Gl obal Focus
J ust-in -in-t -time shipments Supply-chain partners Rapidproduct development, alliances, collaborative designs OPM 533
ang ng a enges for the Operations Manager Past Standardized products J ob specialization
Lowcost focus
Prepared by : Shatina Saad
Cause ses Aff fflu luence ceandworld ldwidemarkets; s; increasin ingly fle lexibleproductio ion processes Changingsoci ciocult ltural milieu. Incr creasin ingly ly aknowledgeand informationsoci ciety. Envir ironmental issues, ISO14000, increasin ingdisposal cost sts
1-28
Future Mass customization Empowered employees, teams, andle lean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing OPM 533
