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Operations Management MBA 642
Dr. Michael Busing
01-14-03
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Some Definitions of Operations Management
• Management of productive resources
• Design and control of systems responsible for productive use of:– raw materials (or supplies for service operations)– people (direct and indirect workforce)– equipment/facilities (factories or service branches)– information (planning and control systems)
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Operations Management (MBA 642)versus Management Science (MBA 610)
• OM is a field of management
• Management Science is the application of quantitative methods to decision making in all fields
• OM decisions are made in the context of the firm as a whole -- starting with customers (i.e., the marketplace) and explicitly considering a firm’s corporate strategy.
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The Production System
• The production system is the heart of OM.– Uses resources to transform inputs into some
desired output.
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Inputs
• RMH - patients
• BW3 - hungry/thirsty customers
• General Motors - sheet steel, engine parts
• JMU – MBA Students
• Pier One - shoppers
• Target Distribution Center - stockkeeping units (SKU’s)
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Transformations
• RMH - health care procedures • BW3 - preparation/service of food/drink• General Motors - fabrication and assembly
of cars• JMU - imparting of knowledge and skills• Pier One - filling of orders• Target Distribution Center - storage and
redistribution
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Desired Outputs
• RMH - healthy individuals
• BW3 - satisfied customers
• General Motors - high quality cars
• JMU - educated and employable individuals
• Pier One - sales to satisfied customers
• Target Distribution Center - right item at right place at right time.
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Why Study Operations Management?
• OM activities are at the core of all business organizations regardless of what business they are in
• At least 35% of all jobs are in OM related areas
– customer service, quality assurance, production planning and control, scheduling, job design, inventory management
• Other functional areas such as information systems, finance, accounting, human resources, logistics, marketing, purchasing, etc. are all interrelated with OM activities.
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Operations Management Professional Societies
• American Production and Inventory Control Society (APICS)
• American Society for Quality (ASQ)
• National Association of Purchasing Management (NAPM)
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Functions Within Business Organizations
• Organizations are formed to pursue goals that are achieved more efficiently by the concerted efforts of a group of people than by individuals working alone.
• Organizations are either profit or nonprofit.
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Functions Within Business Organizations
• Three Basic Functions– finance– marketing– production/operations
• Functions must interact to achieve the goals and objectives of the organization.
• Success depends not only on the individual functional area, but on the interface.
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Operations as it Relates to Other Disciplines
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Functions Within Business Organizations
Personnel/Human Resources
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OM/Finance Interrelationship
• Budgeting: Operating performance - standard costs versus actual costs
• Economic Analysis: Evaluation of various plant/equipment alternatives
• Funding/Provision of funds: Cash Flow issues - how much/when
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OM/Marketing Interrelationship
• Advertising/pricing decisions are made by marketing people.
• Marketing is closest to customer wants/needs and can communicate these to operations (short and long term requirements).
• Marketing is in tune with competition.
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OM/HR Relationship
• Aggregate Planning– Hiring/Firing Decisions– Undertime/Overtime Issues
• Workplace Safety Issues
• Quality/Training Programs
• Productivity/Motivation Issues
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Current Event
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Operations System design versus operation
• System Design Decisions: involves decisions that relate to system capacity, geographic location of facilities, arrangement of departments and placement of equipment, product and service planning, and acquisition of equipment.
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Operations System design versus operation
• System Operation Decisions: management of personnel, inventory planning and control, scheduling, project management, and quality assurance
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Operations System design versus operation
• System design essentially determines many of the parameters of system operation.– e.g., cost, space capacities, and quality
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Differentiation Features of Operations Systems
• Degree of Standardization (standardized versus customized) - volume versus cost
• Type of operation (job shop versus assembly line versus flow)
• Goods versus Services– customer contact, uniformity of input, labor
content, uniformity of output, measurement of productivity, quality assurance.