dom 511 :operations management practice 1- overview
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DOM 511 :Operations Management Practice 1- Overview. By: Munyao-mulwa UON School of Business Dept of Management Science. What is Operation Management?. Manufacturing: Getting the products a company makes to an agreed specification, in due time - PowerPoint PPT PresentationTRANSCRIPT
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DOM 511 :Operations Management Practice
1- Overview
By: Munyao-mulwa
UON School of BusinessDept of Management Science
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What is Operation Management?Manufacturing: Getting the products a company makes to an agreed specification, in due time
Transport: Ensuring the transport runs to an agreed schedule
Retailing: Pushing the merchandise through the store to the consumer
Service: Providing satisfactory, according to an agreed schedule, the service to the customer
Operations Manager: The supplier of products or services required by the market place
Utilises the organization resources to meet the product or service
specifications efficiently & effectively
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Operations ManagementDefinition
Operations management may be defined as the
design, operation, and improvement of the
production system that creates the firm’s primary
products and services.
Analysis of definition;-
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Operations ManagementDefinition
OM is the science & art of ensuring that goods & services are created & delivered successfully to customers.
Applying the principles of OM entails a solid understanding of people, processes, & how they are integrated within a business to create value
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From General Management To Operations Management
Traditional Management paradigm revolves around planning, organizing, directing & controlling
OM is the only means by which managers can directly affect the value provided to all stakeholders – customers, employees, investors & society
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From General Management To Operations Management
Key activities for OM discipline; Understanding the needs of customers, measuring
customer satisfaction & using the information to develop new & improved goods & services
Building quality into goods, services & processes & continually improving them to reduce errors, defects & waste
Using information about customers, goods/services, operations, suppliers, employees etc to make better decisions
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From General Management To Operations Management
Key activities for OM discipline; Exploiting technology to design goods & services
that respond rapidly & flexibly to customer requirements & improve productivity
Creating a high-performance workplace thro’ training, rewards etc
Continually learning from co-workers, competitors & customers & adapting the organization to global & environmental changes
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OM DisciplineOM principles are not complicated for they
constitute the “basics” of everyday life eg
Respect for customer experience
Focus on the dynamics of demand
Recognition that experience is delivered by people etc
>>The fundamental purpose of OM is to deliver ever-improving value to customers through the continuous improvement of overall company performance & capabilities
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Operations Decision MakingMarketplace
Corporate Strategy
Operations Strategy
Operations Management
Marketing StrategyFinance Strategy
People Plants Parts Processes
Planning and Control
Production System
Materials &Customers
Input
Products &Services
Output
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OM Involves Managing Transformations
People Plants Parts Processes Planning and Control
Input OutputTransformation
Process
(Value Adding)
Transformation is enabled by The 5 Ps of OM:
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Operations ManagementDefinition
Value = quality / price How can an organization increase customer
value?
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OM’s Transformation Role
To add value
Increase product value at each stage
Value added is the net increase between output
product value and input material value
Provide an efficient transformation
Efficiency – perform activities well at lowest
possible cost
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Transformations
Physical--manufacturing
Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications
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Systemic Approach
Inputs•Material•Machines•Labor•Management•Capital
TransformationProcess
Outputs•Goods•Services
Requirements
Feedback Feedback
Push or Pull?
Greater value than
inputs
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SIPOC Model
Suppliers Process(+ Owner)
Clients
Responsible for “smooth” operation
Inputs Outputs
Interfaces Management
The output has higher value than the input:VALUE CHAIN
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Operations Function & its Environment
PhysicalTransformation
Activity
Production Technical Core
Other functions (Purchasing, Distribution, R&D…)
FinanceM
arketing H
um
an
Resou
rcesSales
Order
Investments in Equipment
LaborForce
SuppliersProduct / Services
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Operations as the Technical Core
Operations
Finance/Accounting
Human Resources
Marketin
gSu
pp
lier
s
Production andInventory data
Capital budgeting requestsCapacity expansion and
Technology plans
BudgetsCost analysisCapital investmentsStockholder requirements
Orders for materialsProduction and delivery
Schedules QualityRequirements Design/
Performance specs
Material availabilityQuality data
Delivery schedulesDesigns
Product/ServiceAvailability
Lead-time estimatesStatus of order
Delivery schedules
Sales forecastsCustomer orders
Customer feedbackPromotions
Personnel needsSkill sets
Performance evaluationsJob design/work
measurement
Hiring/firingTrainingLegal requirementsUnion contract negotiations
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Trends in OM
Service sector growing to 50-80%
Global competitiveness
Demands for higher quality
Huge technology changes
Time based competition
Work force diversity
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Why OM?
For long-run success companies must place much importance on their operations The 1950-1960 era was the U.S. golden era where
primary opportunities were marketing The 1970-1980 U.S. companies experienced a large
decline in productivity growth – international firms began to challenge in many markets
The 1970-1980 era saw U. S. firms lagging behind in methods and processes
The resurgence of American business in the 1990’s capitalized on improved operations
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Today’s OM Environment
Customers demand better quality, greater speed, and lower costs
Companies implementing lean systems concepts – a total systems approach to efficient operations
Recognized need to better manage information using ERP and CRM systems
Increased cross-functional decision making
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OM in Practice
OM is the most diverse organizational functionManages the transformation processOM has many faces and names such as; Chief Operating Officer, V. P. operations, Director of
supply chain, Manufacturing manager Plant manger, Quality specialist, etc.
All business functions need information from OM in order to perform their tasks
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Historical Events in OM
Industrial Revolution Scientific Management Human Relations Management Science Quality Revolution Globalization Information Age/Internet Revolution
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Historical Events in OMIndustrial Revolution
Steam engine 1769 James Watt
Division of labor 1776 Adam Smith
Interchangeable parts 1790 Eli Whitney
Scientific ManagementPrinciples 1911 Frederick W. Taylor
Time and motion studies 1911 Frank & Lillian Gilbreth
Activity scheduling chart 1912 Henry Gant
Moving assembly line 1913 Henry Ford
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Historical Events in OM
Human RelationsHawthorne studies 1930 Elton Mayo
Motivation theories 1940s Abraham Maslow
1950s Frederick Hertzberg
1960s Douglas McGregor
Management ScienceLinear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, PERT/CPM, 1950s Operations research
Waiting line theory groups
MRP 1960s Joseph Orlicky, IBM
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Historical Events in OM
Quality RevolutionJIT 1970s Taiichi Ohno, Toyota
TQM 1980s W. Edwards Deming,
Joseph Juran, et. al.
Strategy and operations 1990s Skinner, Hayes
Reengineering Hammer, Champy
World Trade Organization 1990s Numerous countries
and companies
GlobalizationEuropean Union and 1970s IBM and others
other trade agreements
EDI, EFT, CIM 1980s
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Historical Events in OMInformation Age/
Internet Revolution
Internet, WWW, ERP 1990sSupply chain Berners-Lee, SAP,management, ORACLE,E-commerce PeopleSoft,
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Historical Development of OM
Time-Based Competition 1990s
Supply chain Management 1990s
Electronic Commerce 2000s
Outsourcing &flattening of the world 2000s
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Objectives of Productive Systems
Volume of output
Cost (materials, labor, delivery, scrap…)
Utilization (labor & equipment)
Quality & product reliability
On-time delivery
Investments (ROI)
Flexibility for product change
Flexibility for Volume change
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The Lifecycle of a Productive System
Birth of the System
Product Design & Process Selection
Design of the System
Start-up of the System
The System in steady state
Termination of the System
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Key Decisions in the life of a Productive system
Birth of the System What are the goals of the firm? What product or service will be offered?
Product Design & Process Selection
Design of the System
Start-up of the System
The System in steady state
Termination of the System
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Key Decisions in the life of a Productive system
Birth of the System
Product Design & Process Selection Form & Appearance of Product? Technologically, how should the product be made?
Design of the System
Start-up of the System
The System in steady state
Termination of the System
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Key Decisions in the life of a Productive system
Birth of the SystemProduct Design & Process SelectionDesign of the System Capacity? Location? Lay-out? How to maintain quality? How to determine forecast for demand? What job is each worker to perform? How will the job be performed & measured? How will the workers be rewarded?
Start-up of the SystemThe System in steady stateTermination of the System
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Key Decisions in the life of a Productive system
Birth of the System
Product Design & Process Selection
Design of the System
Start-up of the System How do you get the system in operation? How long will it take to reach desired level of output?
The System in steady state
Termination of the System
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Key Decisions in the life of a Productive system
Birth of the SystemProduct Design & Process SelectionDesign of the SystemStart-up of the SystemThe System in steady state How do you manage the day to day activities? How do you maintain the system? How can you improve the system? How do you revise the system in light of changes in corporate
strategy?
Termination of the System
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Key Decisions in the life of a Productive system
Birth of the System
Product Design & Process Selection
Design of the System
Start-up of the System
The System in steady state
Termination of the System How does the system die? What can be done to salvage resources?
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Productivity
Become more efficient Downsize Expand Retrench Achieve breakthroughs
Productivity =Productivity =OutputOutput
InputInput
Productivity improves when firms:Productivity improves when firms:
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Productivity
Partial measures output/(single input)
Multi-factor measures output/(multiple inputs)
Total measure output/(total inputs)
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Example
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the labor productivity?
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Example--Labor Productivity
10,000 units/500hrs = 20 units/hour ...
... or we can arrive at a unitless figure
(10,000 unit*$10/unit)/(500hrs*$9/hr) = 22.22
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Competitiveness
The degree to which a an organization can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real wealth of its shareholders.
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Competitiveness
Competition Intensity is high when Firms equal in size Resources, products &
services standardized Slow industry growth (battle
for market shares, the global market remaining constant)
Industry growth exponential (you must have a foothold in the market)
Consequences Price wars Relentless advertising High Frequency of
introduction of new products & services
Free trials Low profit margins Purchasing incentives Switching bonuses Financial packages; cheap
credit
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Entry Barriers
Economies of Scale Fixed & variable costs Unit cost decreases when capacity increases Newcomers: insufficient orders to justify large capacities => higher costs
Initial Capital Investment May be prohibitive (service to community, hospital, robotized mega plant) May be low: e-commerce, consulting…
Access to Supply & Distribution Channels May be controlled by (major) Competitors Bargaining Power (Porter) Exclusivity agreements Largely easier when going to e-commerce (no broker, distributor needed)
Learning curves Lack of experience, skills, expertise can be penalizing (aerospace,
shipbuilding [10% cost reduction for each similar ship built])