operations management - bms 4/om/session 1... · 2018-04-04 · improvement in an operational...
TRANSCRIPT
What is Operations Management
and its importance in today’s
business environment?
1/11/2018
Learning Outcomes
LO1 - Review and critique the effectiveness
of operations management principles
LO2 - Apply the concept of continuous
improvement in an operational context
➢ OM in the Organizational Chart
➢ Operations Management Defined
➢ Operations Function and its Environment
➢ Historical Development of the OM Field
➢ Understand the 4 dimensions of OM (4Vs)
➢ Overview of 5 performance objectives in OM
➢ Overview of current challenges in OM
Operations Management - Session 1
OM in the Organizational Chart
Organization
Finance Marketing Human Resource Operations
5
The two important concepts
1. Operations
2. Operations Management
• All types of business have ‘operations’ because
all businesses produce some mix of products
and services.
• ‘Operations management’, which examines how
the ‘operations function’ of a business produces
products and services for external customers.
What is Operations Management?
They are all
operations
producing
goods or
services
Back office operation
in a bankKitchen unit
manufacturing operation
Retail operationTake-out / restaurant
operation
Slide 9 of 33
Functions - Airline
OperationsFinance/
AccountingMarketing
Ground
Support
Flight
Operations
Facility
MaintenanceCatering
Airline
Slide 10 of 33
Functions - Bank
OperationsFinance/
AccountingMarketing
Check
Clearing
Teller
Scheduling
Transactions
ProcessingSecurity
Commercial Bank
Slide 11 of 33
Functions - Manufacturer
OperationsFinance/
AccountingMarketing
Production
ControlManufacturing
Quality
ControlPurchasing
Manufacturing
• PRODUCTION is the creation of goods
and services
• OPERATIONS MANAGEMENT is
– the set of activities that
– creates goods and services
– through the transformation of inputs into
outputs
What is Operations Management?
All operations are transformation processes …
Transformation processInputs
that transform inputs …
Outputs
into outputs
Different forms of transformations
• Physical--manufacturing
• Locational--transportation
• Exchange--retailing
• Storage--warehousing
• Physiological--health care
• Informational--telecommunications
Operations function and its objectives
The Key word: Creating customer value
The management of the conversion process
which converts land, labour, capital and
management inputs into desired outputs of
goods and services.
Operations management defined
Operations management (OM) is defined as
the design, operation, and improvement of the
systems that create and deliver the firm’s
primary products and services.
Processes and Operations
Outputs• Services
• Goods
Internal and
external customers
Information on
performance
Processes and
operations
5
1
2
3
4
Inputs• Workers
• Managers
• Equipment
• Facilities
• Materials
• Services
• Land
• Energy
Inputs to the process
Although products and
services are different, the
distinction can be very
indirect.
Outputs from the process:
• Pure products
• Pure service
What is Product - Service continuum?
Goods & Services
The key differences between products and services
Continuum of Characteristics
More like a manufacturing organization
More like a service
organization
• Physical, durable product
• Output that can be
inventoried
• Low customer contact
• Long response time
• Large facilities
• Capital intensive
• Quality easily measured
• Intangible, perishable
product
• Output that cannot be
inventoried
• High customer contact
• Short response time
• Small facilities
• Labor intensive
• Quality not easily measured
The Operations Manager and the Management Process
1. Planning
Capacity
Location
Products & Services
Make or Buy
Layout
Projects
Scheduling
2. Organizing
Degree of centralization
Process selection
3. Staffing
Hiring/Laying off
Use of overtime
The Operations Manager and the
Management Process (Cont’d)
4. Directing
Incentive Plans
Assurance of Work orders
Job Assignments
5. Controlling/Improving
Inventory
Costs
Quality
Productivity
Operations Function and its
Environment
The relationship between the operations and support
functions of the organization
Historical Development of OM
• In 1911 the advent of scientific management is probably the major historical land mark of the field.
• The concept was developed by Frederick W. Taylor, an engineer and insightful observer of organizational activities.
❖ There are three underlying principles:
1. Scientific laws govern how much worker can produce per day
2. It is the function of management to discover these laws and
use them in the operation of productive systems
3. It is the function of the worker to carry out management
wishes without question.
Historical Development of OM
• 1913 : Moving Assembly line – Henry Ford
• 1927 : Hawthorn studies of worker motivation by Elton
Mayo. (to study the effects of physical conditions on
productivity).
• 1940’s : Operations research assisted in making the
field of manufacturing more efficient and effective
• 1950’s and 1960’s : OM emerge as a field
• 1970’s : Computers and the Material Requirements
Planning (MRP) application spread
Historical Development of OM
• 1980’s : JIT, TQC and Factory Automation,
Manufacturing strategy paradigm (emphasis how
manager can use their factory capability as a strategic
weapon)
• 1990’s : Service Quality and productivity, Total Quality
Management, Quality certification, business process
reengineering techniques were introduced.
• 2000’s : Ecommerce using internet and world wide
web.
A Typology of Operations
Variation in
demand High Low
VisibilityHigh Low
VarietyHigh Low
HighVolumeLow High
A Typology of OperationsImplications Implications
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Stable
Routine
Predictable
High utilization
Low unit costs
Variation in
demand High Low
VisibilityHigh Low
Short waiting tolerance
Satisfaction governed by customer perception
Customer contact skills needed
Received variety is high
High unit costs
Time lag between production and consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Flexible
Complex
Match customer needs
High unit costs
Well defined
Routine
Standardized
Regular
Low unit costs
VarietyHigh Low
High
Low repetition
Each staff member performs more of job
Less systemization
High unit costs
High repeatability
Specialization
Capital intensive
Low unit costs
VolumeLow High
The Five performance objectives
• Quality
• Speed
• Dependability
• Flexibility
• Cost
Decision Areas Issues
Layout Design How should we arrange the
facility?
How large must the facility be to
meet our demand?
Human resource
and job design
How do we provide a reasonable
work environment?
How much can we expect our
employees to produce?
OM critical decisions
Decision Areas Issues
Supply-chain
management
Should we make or buy this
component?
Who are our suppliers and who
can integrate into our e-
commerce programme?
Inventory,
material
requirement
planning, and
Just-in-Time
How much inventory of each item
we have?
When do we re-order?
OM critical decisions
Decision Areas Issues
Intermediate
and short term
scheduling
Are we better off keeping people
on the payroll during slowdowns?
Which job do we perform next?
Maintenance Who is responsible for
maintenance?
When do we do our
maintenance?
OM critical decisions
Slide 36 of 25
New Challenges in OM
• Local or national focus
• Batch shipments
• Low bid purchasing
• Lengthy product
development
• Standard products
• Job specialization
• Low-cost focus
• Ethics not at forefront
• Global focus
• Just-in-time
• Supply chain partnering
• Rapid product
development
• Mass customization
• Empowered employees
• Environmental friendly
• High ethical standards
➢ OM in the Organizational Chart
➢ Operations Management Defined
➢ Operations Function and its Environment
➢ Historical Development of the Field
➢ Understand the 4 dimensions of OM (4Vs)
➢ Overview of 5 performance objectives in
OM
Operations Management - Session 1
➢ OM in the Organizational Chart
➢ Operations Management Defined
➢ Operations Function and its Environment
➢ Historical Development of the OM Field
➢ Understand the 4 dimensions of OM (4Vs)
➢ Overview of 5 performance objectives in OM
➢ Overview of current challenges in OM
Session 1 - Summary
Design a store layout
which gives smooth
and effective flowDesign elegant
products which can be
flat-packed efficiently
Site stores of an
appropriate size in
the most effective
locations
Maintain cleanliness
and safety of storage
areaArrange for fast
replenishment of
products
Monitor and enhance
quality of service to
customers
Continually examine
and improve
operations practice
Ensure that the jobs of
all staff encourage
their contribution to
business success
Operations management at IKEA
Classroom Exercise (Group)
1 Select a large Sri Lanka organization (Manufacturing or Service) and identify operations management activities.