1) introduction to opeartions management

7/27/2019 1) Introduction to Opeartions Management

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Introduction

Operations management


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Syllabus

1. Introduction to Operations Management

2. Product design

3. Process selection

4. Facility decisions - Layout design - Location analysis

5. Capacity planning

6. Aggregate Planning

7. Supply Chain Management

8. Inventory Management9. MRP, Scheduling

10. Quality Management, JIT


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Basic Functions of Business

Organizations

Ensure and

allocating financial

resources

Produce goods or

servicesAssess consumer

needs, and sell /

promote goods or

services


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What is Operations Management?

The business function responsible for planning,

coordinating, and controlling the resources

needed to produce a companys products and

services


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Introduction

Operations management is the management of

an organizations productive resources or its

production system.

A production system takes inputs and converts

them into outputs.

The conversion process is the predominant

activity of a production system. The primary concern of an operations manager is

the activities of the conversion process.


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Historical Milestones in OM

The Industrial Revolution

Post-Civil War Period

Scientific Management Human Relations and Behaviorism

Operations Research

The Service Revolution


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The industrial revolution developed in England inthe 1700s.

The steam engine, invented by James Watt in1764, largely replaced human and water powerfor factories.

Adam Smiths The Wealth of Nations in 1776touted the economic benefits of thespecialization of labor.

Thus the late-1700s factories had not onlymachine power but also ways of planning andcontrolling the tasks of workers.


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The industrial revolution spread from England toother European countries and to the UnitedSates.

In 1790 an American, Eli Whitney, developed theconcept of interchangeable parts.

The first great industry in the US was the textileindustry.

In the 1800s the development of the gasolineengine and electricity further advanced therevolution.

By the mid-1800s, the old cottage system ofproduction had been replaced by the factorysystem.


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Post-Civil War Period

During the post-Civil War period great

expansion of production capacity occurred.

By post-Civil War the following developments

set the stage for the great production

explosion of the 20th century:

increased capital and production capacity

the expanded urban workforce

new Western US markets

an effective national transportation system


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Scientific Management

Frederick Taylor is known as the father ofscientific management. His shop systememployed these steps: Each workers skill, strength, and learning ability were

determined. Stopwatch studies were conducted to precisely set

standard output per worker on each task.

Material specifications, work methods, and routing

sequences were used to organize the shop. Supervisors were carefully selected and trained.

Incentive pay systems were initiated.


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Scientific Management

In the 1920s, Ford Motor Companysoperation embodied the key elements ofscientific management:

standardized product designs mass production

low manufacturing costs

mechanized assembly lines

specialization of labor

interchangeable parts


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Human Relations and Behavioralism

In the 1927-1932 period, researchers in theHawthorne Studies realized that humanfactors were affecting production.

Researchers and managers alike wererecognizing that psychological and sociologicalfactors affected production.

From the work of behavioralists came agradual change in the way managers thoughtabout and treated workers.


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Operations Research During World War II, enormous quantities of

resources (personnel, supplies, equipment, )had to be deployed.

Military operations research (OR) teams wereformed to deal with the complexity of thedeployment.

After the war, operations researchers found theirway back to universities, industry, government,and consulting firms.

OR helps operations managers make decisionswhen problems are complex and wrong decisionsare costly.


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The Service Revolution

The creation of services organizations acceleratedsharply after World War II.

Today, more than two-thirds of the US workforceis employed in services.

About two-thirds of the US GDP is from services.

There is a huge trade surplus in services.

Investment per office worker now exceeds the

investment per factory worker. Thus there is a growing need for service

operations management.


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The Computer Revolution

Explosive growth of computer andcommunication technologies

Easy access to information and the availability ofmore information

Advances in software applications such asEnterprise Resource Planning (ERP) software

Widespread use of email

More and more firms becoming involved in E-Business using the Internet faster, better decisions over greater distances


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Today's Factors Affecting OM

Global Competition

Quality, Customer Service, and Cost

Challenges

Rapid Expansion of Advanced Technologies

Continued Growth of the Service Sector

Scarcity of Operations Resources Social-Responsibility Issues


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Studying Operations Management

Operations as a System

Decision Making in OM


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Operations as a System

Inputs Outputs

Conversion

Subsystem

Production System

Control

Subsystem


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Inputs of an Operations System

External

Legal, Economic, Social, Technological

Market

Competition, Customer Desires, Product Info.

Primary Resources

Materials, Personnel, Capital, Utilities


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Conversion Subsystem

Physical (Manufacturing)

Locational Services (Transportation)

Exchange Services (Retailing) Storage Services (Warehousing)

Other Private Services (Insurance)

Government Services (Central and State)


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Outputs of an Operations System

Direct

Products

Services

Indirect

Waste

Pollution

Technological Advances


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Production as an Organization

Function

Companies cannot compete with marketing,finance, accounting, and engineering alone.

We focus on OM as we think of global

competitiveness, because that is where thevast majority of a firms workers, capitalassets, and expenses reside.

To succeed, a firm must have a strongoperations function teaming with the otherorganization functions.


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Decision Making in OM

Strategic Decisions

Operating Decisions

Control Decisions


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Strategic Decisions

These decisions are of strategic importance

and have long-term significance for the

organization.

Examples include deciding:

the design for a new products production process

where to locate a new factory

whether to launch a new-product development

plan


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Operating Decisions

These decisions are necessary if the ongoing

production of goods and services is to satisfy

market demands and provide profits.


how much finished-goods inventory to carry

the amount of overtime to use next week

the details for purchasing raw material next

month


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Control Decisions

These decisions concern the day-to-day

activities of workers, quality of products and

services, production and overhead costs, and

machine maintenance.


labor cost standards for a new product

frequency of preventive maintenance

new quality control acceptance criteria


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What Controls the Operations System?

Information about the outputs, the

conversions, and the inputs is fed back to

management.

This information is matched with

managements expectations

When there is a difference, management must

take corrective action to maintain control of

the system


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Goods vs. Services


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29

CRUDE

OILPRODUCTION

ALUMINIUM

SMELTING

SPECIALISTMACHINE

TOOL

MANUFACTURER

RESTAURANT

COMPUT

ERSYSTEMSSERVICES

MANAGEMENTCONSULTANCY

PSYCHOTHERAPYCLINIC

PURE GOODSTangible

Can be stored

Production precedesconsumption

Low customer contact

Can be transportedQuality is evident

PURE SERVICES

Quality difficult to judge

Cannot be transported

High customer contact

Production andconsumption are

simultaneous

Cannot be stored

Intangible

Output of most Operations a Mixture of Goods

and Services


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Goods Versus Services - 1

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

Good Service


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Goods Versus Services - 2

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 forcustomer contact

Often difficult to automate

Revenue generated

primarily from intangibleservice.

Good Service


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Operations processes have

different characteristics


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The Four Vs Volume of demand

How many the organisation makes Service vs. Mass Production

Varietyin operations

The ability to adapt the transformation process to meet needs of thecustomer

Taxi vs. Train

Variation in demand

Adapting to changing demand

Visibility of transformation

How much of the operations functions are visible to the customer

Some operations have mixed high/low visibilityeg Restaurant Front and Kitchen

Often they are in conflict


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VARIATION IN DEMANDHigh Low

EXAMPLES

A Typology of Operations

EXAMPLES

Television plant

Fast food restaurantRoutine surgery

Mass rapid transport

Electricity generatorfactory

Gourmet restaurantPioneering surgery

Taxi service

Bespoke tailor

University tutorials

Corporate tax adviceDepartment store

Off-the-peg suit plant

University lectures

Financial auditsJeans shop

Electricity utility

Financial audits

Emergency service

London underground

Bread bakery

Consultancy advice

Shopping mall security

Trucking operation

Health care

"Cook at your table"restaurant

Dentist

Music teacher

Most manufacturing

Prepackaged sandwich

maker

Dental technicians

Distance learning

High LowVISIBILITY

VARIETYHigh Low

VOLUMELow High


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The Most Important Conflict

Volume vs. Variety

Project Job Batch Mass Continuous

Product Unique Unique

aspect to

each product

Made to

order

Made to stock Commodity

Volume Very Low Very low to

low

Low to

medium

High Very High

Variety Infinite Very high to

high

Medium to

high

Low Very Low


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Process Types - Products

Project

Job

Batch

Mass

Continuous

Volume

Variety

Low

High

Low High


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Process Types - Services

Professional

Service (e.g shops)

Mass Services

Volume

Variety

Low

High

Low High


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Five Performance Objectives


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Five Performance Objectives

Quality

Speed

Dependability Flexibility

Cost


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The Five Performance Objectives

1. Quality

2. Speed: how long do customers have to wait to

receive their products or services

3. Dependability: customers receive their goods andservices when promised

4. Flexibility / Adaptability : Greater ability to

change operations in some way

5. Cost

The Benefits Of Quality


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Reduces Costs.

Increases Dependability.

Increases Speed.

Boosts Moral.

Increased Customer Retention

Increased Profit.

Internal Benefits External Benefits

What is it ................ ?

Getting it right first Time!

The Benefits Of Quality.

Customer Gets Correct

Product Or Service.

Correct Specifications.

Appropriate

Intangibles.

Customer Satisfaction.

Customer Retention.

The Benefits Of Speed


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Reduces Inventory.Reduces Risk.

Increases Response Rate.

Reduces Cost.

Increases Dependability.


What is it ................ ?

The Lead Time From Order To Delivery.

The Benefits Of Speed.

The Customer Receives

Their Order Quickly.

The Availability Of Goods

Is High.

Enhances Offering To

Customer.

Increases Likelihood of

Purchase.

Increases Satisfaction.

Increases Profit.

The Benefits Of Dependability


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Saves Time With Reliable

Planning.

Saves Money Because Can

Plan For Least Cost.

Gives Stability To Planned

Schedule.

Reduces Buffer Stock.

Reduces Rushed Poor Quality.


What is it ................ ?

Delivering The Customers Orders When They Wanted

Them!

The Benefits Of Dependability.

The Customer Receives

Their Order When

Wanted.

The Availability and

Utilisation Of Goods Is

High.

Increases Satisfaction.

Increases Profit.

The Internal Benefits Of Flexibility


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What is it ................ ?

Changing What The Operation Does, How and When It

Does It.

The Internal Benefits Of Flexibility.

Increases The Range Of Products

and Services Available.

Allows A Varying Mix Of Products.

Can Alter The Volume Of Products

delivered.

Can Vary the Delivery Schedule.

Better Meets CustomerRequirements.

Increases Speed Of Response.

Saves Time.

Maintains Dependability.


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Speed

Flexibility

Cost

Dependability

Quality

The operations function can provide a competitive advantage through

its performance at the five competitive objectives

Being RIGHT

Being FAST

Being ON TIME

Being ABLE TO CHANGE

Being PRODUCTIVE


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The benefits of excelling

Minimum cost,maximum value

Reliableoperation

Ability tochange

Error-freeprocesses

Fastthroughput

Cost

Speed

Quality Flexibility

Depend-ability

Minimum price, highest value

Quickdelivery

Dependabledelivery

Error-freeproducts and

services

Frequent newproducts,maximum

choice

Polar Diagrams


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Polar Diagrams.

SpeedDependability

Cost

Quality Flexibility

1) introduction to opeartions management

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