Transcript OPERATIONS MANAGEMENT

OPERATIONS
MANAGEMENT
OPERATIONS
AND PRODUCTIVITY
$ Mo Money Mo Problems $
OUTLINE
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What is Operations Management?
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The heritage of Operations Management
Why study OM?
What Operations Managers do?
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Organizing to produce goods and services
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Where are the OM jobs?
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Exciting new trends in Operations Management
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Operations in the service sector
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The Productivity challenge
LEARNING OBJECTIVES
When you complete this chapter, you should be able to:
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Identify or Define:
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Production and productivity
Operations Management (OM)
What operations managers do
Services
Describe or Explain:
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A brief history of operations management
The future of the discipline
Measuring productivity
WHAT IS OPERATIONS
MANAGEMENT?
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Operations Management
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Operations Management
is the set of activities that
creates goods and services by transforming inputs into
outputs
focuses on carefully
managing the processes to produce and distribute products
and services.
AND PRODUCTION
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Production is the creation of goods and services
SIGNIFICANT EVENTS IN
OPERATIONS MANAGEMENT
Division of labor (Smith, 1776)
 Standardized parts (Whitney, 1800)
 Scientific management (Taylor, 1881)
 Coordinated assembly line (Ford 1913)
 Gantt charts (Gantt, 1916)
 Motion study (the Gilbreths, 1922)
 Quality control (Shewhart, 1924)
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SCIENTISTS
Adam Smith
He suggested that the huge
increases in productivity
obtainable from technology
or technological progress
are possible because
human and physical capital
are matched, usually in an
organisation.
Eli Whitney
Whitney's defenders have
claimed that he invented the
American system of
manufacturing-- the
combination of power
machinery, interchangeable
parts, and division of labor
that would underlie the
nation's subsequent industrial
revolution.
Frederick Winslow Taylor
He developed the theory of
management that analyzes
and synthesizes processes,
improving labor productivity.
Henry Ford
He said that an assembly line
is a manufacturing process in
which interchangeable parts
are added to a product in a
sequential manner using
optimally planned logistics to
create a finished product
much faster than with
handcrafting-type methods.
Henry Gantt
A Gantt chart is a popular
type of bar chart that
illustrates a project
schedule. Gantt charts
illustrate the start and finish
dates of the terminal
elements and summary
elements of a project.
The Gilbreths
The Gilbreths' motion
studies were more
focused on how a task
was done, and how best
to eliminate unneeded,
fatiguing steps in any
process.
Walter Shewhart
Shewhart framed the problem in
terms of assignable-cause and
chance-cause variation and
introduced the control chart as a tool
for distinguishing between the two.
Shewhart stressed that bringing a
production process into a state of
statistical control, where there is only
chance-cause variation, and keeping
it in control, is necessary to predict
future output and to manage a
process economically.
SIGNIFICANT EVENTS
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CPM/PERT (Dupont, 1957)
MRP (Orlicky, 1960)
CAD
Flexible manufacturing systems (FMS)
Manufacturing automation protocol (MAP)
Computer integrated manufacturing (CIM)
WHY STUDY OM?
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OM is one of three major functions (marketing,
finance, and operations) of an organization
We want/need to know how goods and services
are produced
We want to know what operations managers do
OM is such a costly part of an organization
WHY STUDY OM?
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Related activities:
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managing purchases
inventory control
quality control
storage
logistics
evaluations
and we need to comunicate them with each others.
WHY STUDY OM?
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OM often includes substantial measurement
and analysis of internal processes, because a
great deal of focus is on efficiency and
effectiveness of processes.
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Ultimately, the nature of how operations
management is carried out in an organization
depends very much on the nature of products or
services in the organization.
WHAT OPERATIONS MANAGERS
DO (by Henri Fayol):
Plan
 Organize
 Staff
 Lead
 Control
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PLANNING
The process of deciding what to do. Effective planning seeks to
answer questions such as:
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What should the firm do? The output of this process are goals and objectives.
When must the firm achieve these goals? The output is a schedule defining
milestones and due dates.
Who is responsible for doing it? The outputs are assigned responsibilities.
How should this be done? The outputs may be directions or plans of action.
How should performance be measured? The output includes standards of
performance.
Planning is forward looking. When planning is operational,
the planning horizon is shorter and the level of detail within is
greater. When strategic, the planning horizon is long and done
in less detail.
ANALYSING
The process of making sense of data that is often:
poorly structured, incomplete, inconsistent, inaccurate,
and/or available in overwhelming quantities.
Analysis supports the planning process by
providing the “facts” in useful formats that can then be
used to evaluate business alternatives.
Analyzing also supports management’s control
activity by providing the basis for corrective actions.
ORGANIZING
The process of building organization structures and
interrelated task coordination teams. In the past,
organizing dealt mostly with humans, but increasingly
it involves data-getting:
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the right person
the right information
in the right form
at the right time
those factors are the key success in organization
design.
DIRECTING/IMPLEMENTING
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An action-oriented process that carries out
the outputs of the first three management
activities.
This is where money is made and lost (!).
In this process, management expends
resources to perform the tasks defined by
the planning process.
CONTROLLING
The process of measuring the results of the other four
management activities.
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Were the plans any good?
Did the analysis provide meaningful information to the
other processes?
How well did we organize our resources to get the job
done?
How well did we do it?
We might even add, how well did we measure the
performance of our control function?
10 CRITICAL DECISIONS
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Service, product design
Quality management
Process, capacity design
Location
Layout design
Human resources, job design.
Supply-chain management
Inventory management
Scheduling
Maintenance
SECTION OF OM
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Procurement (Purchasing) Practices
• reviews guidelines for buying various materials from
suppliers and vendors - materials, including computers,
services from lawyers, insurance, etc.
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Management Control and Coordinating Function
• includes a broad range of activities to ensure that
organizational goals are consistently being met in an
effective and efficient fashion
SECTION OF OM
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Product and Service Management
• the major activities involved in product and service
management are similar to those in operations
management. However, operations management is
focused on the operations of the entire organization,
rather than managing a product or service.
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Quality Management
• is crucial to effective operations management,
particularly continuous improvement. More recent
advancements in quality, such as benchmarking and
Total Quality Management, have resulted in
advancements to operations management as well.
SECTION OF OM
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Inventory Management
• Costs can be substantial to store and move
inventory. Innovative methods, such as Just-in-Time
inventory control, can save costs and move products
and services to customers more quickly.
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Logistics and Transportation Management
• is focused on the flow of materials and goods from
suppliers, through the organization and to the
customers, with priority on efficiency and cost
effectiveness.
SECTION OF OM
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Facilities Management
• depnds a great deal on effective management of facilities,
such as buildings, computer systems, signage, lighting, etc.
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Configuration Management
• It's important to track the various versions of products and
services. Consider the various versions of software that
continually are produced, each with its own version number.
Tracking these versions is configuration management.
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Distribution Channels
• The means of distribution depend very much on the nature of
the product or service.
ORGANISATIONAL FUNCTIONS
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Marketing
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Operations
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Gets customers
creates product or service
Finance/Accounting
Obtains funds
 Tracks money
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WHERE ARE THE OM JOBS?
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Technology/methods
Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
NEW CHALLENGES IN OM
FROM
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Local or national
focus
Batch shipments
Low bid purchasing
TO
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Lengthy product
development
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Standard products
Job specialization
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Global focus
Just-in-time
Supply chain
partnering
Rapid product
development,
alliances
Mass customization
Empowered
employees, teams
CHARACTERISTICS OF
GOODS
Tangible product
 Consistent product definition
 Production usually separate from
consumption
 Can be inventoried
 Low customer interaction
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CHARACTERISTICS OF
SERVICES
Intangible product
 Produced & consumed at same time
 Often unique
 High customer interaction
 Inconsistent product definition
 Often knowledge-based
 Frequently dispersed
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GOODS VS. SERVICES
SERVICES
GOODS
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Can be resold
Can be inventoried
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Some aspects of
quality measurable
Selling is distinct from
production
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Reselling unusual
Difficult to inventory
Quality difficult to
measure
Selling is part f
serviceo
GOODS VS. SERVICES (2)
SERVICES
GOODS
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Product is transportable
Site of facility important
for cost
Often easy to automate
Revenue generated
primarily from tangible
product
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Provider, not product is
transportable
Site of facility important
for customer contact
Often difficult to
automate
Revenue generated
primarily from
intangible service.
THE ECONOMIC SYSTEM
TRANSFORMS INPUTS TO OUTPUTS
Inputs
Land, Labor,
Capital,
Management
Process
The economic system
transforms inputs to outputs
Feedback loop
Outputs
Goods and
Services
INPUTS / OUTPUTS
PRODUCTIVITY
Measure of process improvement
 Represents output relative to input
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Productivity
Units produced
= Input used
Productivity increases improve standard of
living
 From 1889 to 1973, U.S. productivity
increased at a 2.5% annual rate
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MEASUREMENT PROBLEMS
Quality may change while the quantity of
inputs and outputs remains constant
 External elements may cause an increase
or decrease in productivity
 Precise units of measure may be lacking
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PRODUCTIVITY VARIABLES
Labor - contributes about 10% of the
annual increase
 Capital - contributes about 32% of the
annual increase
 Management - contributes about 52% of
the annual increase
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SERVICE PRODUCTIVITY
Typically labor intensive
 Frequently individually processed
 Often an intellectual task performed by
professionals
 Often difficult to mechanize
 Often difficult to evaluate for quality
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