Transcript Lesson 02 Opeartions Management

Lesson 02
Operations Management
the management (planning, controlling, executing) of systems or
processes that create goods or services
Inputs
Transformation
process
Goods
Services
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Goods
Goods
manufacturing a product (e.g. golf ball, refrigerator, electronic
equipment, lawn mowers, pencils, food/cereal, automobiles,
tires, etc.)
Characteristics
• Physical, durable product
• Output can be inventoried
• Low customer contact
• Long response time
• Regional, national or
International markets
• Large facilities
• Capital intensive
• Quality easily measured
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Services
Services
act oriented (e.g. government, wholesale/retail, financial,
healthcare, personal services, business services, education,
etc.)
Characteristics
• Intangible, perishable product
• Output cannot be inventoried
• High customer contact
• Short response time
• Local markets
• Small facilities
• Labor intensive
• Quality not easily measured
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What about McDonald’s?
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Comparison: Goods & Service Businesses
Differences
Goods
Services
Output
Customer contact
Uniformity of input
Labor content
Uniformity of output
Productivity measurement
Opportunity to correct
quality problems
Tangible
Low
High
Low
High
Easy
Intangible
High
Low
High
Low
Difficult
High
Low
High
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Crossing the Line
Goods
Service
Surgery, teaching
Song writing, software development
Computer repair, restaurant meal
Automobile Repair, fast food
Home remodeling, retail sales
Automobile assembly, steel making
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Supply Chain
Supply Chain – a sequence of activities and organizations involved in producing and
delivering a good or service
Suppliers’
suppliers
Direct
suppliers
Producer
Distributor
Final
Customers
Supply Chain for bread
field to supermarket
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Domestic US Jobs
U.S. Manufacturing vs. Service Employment
Year
Mfg. Service
25
75
Where are all the
production jobs going?
• Productivity
Increasing productivity allows
companies to maintain or
increase
their output using fewer
workers
• Technology/Robotics
More powerful computers and
robotics create the need for
fewer
workers
• Outsourcing
Some manufacturing work has
been outsourced to more
productive companies
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So, Why Study OM?
Core of all manufacturing business organizations
35% of all jobs are in OM
customer service
quality assurance
production planning and control
scheduling
inventory management
warehouse management
Interrelates with all other business organizations
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3 Basic Functional Organizational Areas
Organization
Finance
Operations
Marketing
Budgeting
Distribution and Warehousing
Selling and Promoting
Economic analysis of
investment proposals
Industrial Engineering
Assess customer needs
Maintenance (facilities, equipment)
Provide information on new
customer needs
Provision of funds
Accounting
Personnel/Human Resources
Purchasing & Quality Assurance
Communicating realistic
“lead times” to customers
Management Information Systems
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3 Basic Functional Organizational Areas
Overlap and require a
tremendous amount of
interaction/communication
Finance
Operations
Marketing
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Interfaces with Other Departments
Industrial
Engineering
Maintenance
Distribution
Purchasing
Public
Relations
Operations
Legal
Personnel
Accounting
MIS
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Elements of Operations Management
Forecasting
Capacity Planning
Scheduling
Managing Inventory
Purchasing
Manufacturing
Personnel
Assuring Quality
Industrial Engineering
Distribution
Facilities and Location Planning
Accounting
Public Relations
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Value Added
Value Added is the difference between the cost of inputs and the value
or price of outputs. The transformation process must add value for an
organization to be profitable/viable.
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Value added
Transformations
Outputs
Goods
Services
Feedback
Control
Feedback
Feedback
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Transformations
Physical
Goods Producing (manufacturing,
farming, mining, construction, power
generation)
Location
Transport / Storage (Warehousing,
trucking, hotels, airlines)
Exchange
Retail (Wal-Mart, Dillard's, etc.)
Physiological Healthcare (Hospitals, doctors,
dentists)
Psychological Entertainment (Films, radio, television,
performing arts, recording industry)
Informational Communications (Newspapers, radio,
telephone, satellites)
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Value Added
The greater the value added the more funds that are available for an
organization to invest in
research and development
new facilities and equipment
growth
employee programs
viability
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Food Processor Value Added
Inputs
Fresh Sardines
Metal Sheets
Water
Energy
Building
Labor
Equipment
Processing
Cleaning
Making Cans
Cutting
Cooking
Packing
Labeling
Outputs
Canned Sardines
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Healthcare Value Added
Inputs
Examination
Surgery
Monitoring
Medication
Therapy
Processing
Doctors
Nurses
Hospital Facility
Medical Supplies
Equipment
Laboratories
Outputs
Healthy Patients
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Designing/Operating the Transformation
Function
Decision Area
Demand
Forecasting
Basic Question
What will demand be?
Design
What do customers want?
How can products and services be improved?
What processes should the organization use?
How much capacity will be needed?
How can the organization best meet these requirements?
What is the best arrangement for departments, equipment,
workflow, and storage in terms of cost, productivity?
What is the best way to motivate employees?
How to measure work? How to improve work methods?
What is a satisfactory location for a faciltiy (factory,
warehouse, store, etc.)
Product/Service Design
Process Selection
Capacity
Layout
Design of work systems
Location
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Designing/Operating the Transformation
Function
Decision Area
Operations Quality
Quaity Control
Basic Question
How is quality defined?
Are processes preforming adequately? What standards
should be used? Are standards being met?
Total Quality Management How are quality goods and services achieved and improved?
Aggregate Planning
How much capacity will be needed over the intermediate
time frame?
Inventory Management
How much to order? When to reorder? Which items should
get the most attention?
Materials Planning
What materials, parts, and subassemblies will be needed
and when?
Project Management
Which activities are the most critical to the success of a
project? What are the goals of a project? What rousources
will be needed and when will they be needed?
Waiting Lines
What capacity is appropriate?
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Role of the Operations Manager
The chief role of the operations manager is to be a planner and a
decision maker with respect to the previously mentioned areas. Some of
the decision making tools at an operations managers disposal will be
discussed as part of this course.
Listed in the following few slides is an overview
of some of the methodologies we will discuss.
What - What resources/what amounts
When - Needed/scheduled/ordered
Where - Work to be done
How - Designed
Who - To do the work
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Decision Making Tools
Models - abstractions of reality
Physical
Schematics
Mathematical
Quantitative tools - mathematical models
Linear Programming
Inventory Models
PERT/CPM (Project Evaluation and Review Techniques)
Statistics
Simulation
Computer Analysis (Microsoft EXCEL is a very useful
tool for creating models to do “what-if” analysis)
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Decision Making Tools
Trade-off analysis
Evaluating decisions based on other issues such as
financial considerations, company policy, etc. (e.g. in
considering how much inventory to stock one must
consider the financial implications!)
Pro-Con analysis
Evaluating decisions based on an objective/subjective
evaluation of the positive and negative points of the
situation under consideration
Pro’s
Con’s
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Decision Making Tools
Establish Priorities
Prioritize factors which are important to a situation and
determine the most important few which most influence the
decision
Sometimes referred to as the 80/20 rule which basically means
that out of all the factors which influence a decision 20% of
them will most influence the decision outcome … more
commonly known as the Pareto rule.
Do not get caught working on problems which are not important
… it may show that are not aware of what is most important in
your business.
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An Example of Operations Improvement
Henry Ford
13 hours to make a car - Can we do it better?
Solution
Pull chassis down a line with a rope and add parts
from strategically placed piles of parts
Result
5 hours to make a car
Can we do it better (continual improvement)?
Result
standardization, conveyors, computers, robotics,
automation can produce a car in less than an hour
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Recent Trends Influencing OM
• Global Marketplace for markets, sourcing, finance
• International Trade Agreements (NAFTA, GATT)
• Corporate Strategic Planning (integrating OM strategies)
• Total Quality Management (TQM) programs
• Flexibility in manufacturing methods and lead time reduction (quick
delivery allows cost cutting and cost containment for increased
leverage against lower cost global competition
• Technology (computers, robotics, automation)
• Re-engineering - rethink how products are designed and
manufactured
• Environmental Issues
• Corporate downsizing (how to get more done with less because of
stock holder pressures and global labor wage pressures
• Lean production - fewer levels of management
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Global Hourly Wage Rates (US$)
Global Hourly Wages (US $)
35
30
$
25
20
15
10
5
0
75
80
85
90
95
100
Year
US
Mex.
Japan
Ger.
EU.
Asia
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Operations Manager Success
POM success depends on the familiarity with the techniques discussed
in this course. Most modern companies subscribe to the philosophy that
knowledge of decision science techniques are critical to their overall
business success.
Whether your career is in production operations management or not,
familiarity and knowledge of these techniques will be beneficial to your
career because of the interrelationship between POM and other
functional areas of an organization.
Production/
Operations
.
Finance
Marketing
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Homework
Read and understand all material in the chapter.
Discussion and Review Questions
Recreate and understand all classroom examples
Exercises on chapter web page
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