Transcript Operations Management Operations Management Chapter 1: Operations Function      A general model of the operations functions Operations management activities History of the Operations function Industrial &

Operations Management
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Operations Management
Chapter 1: Operations Function
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A general model of the operations functions
Operations management activities
History of the Operations function
Industrial & Post industrial society
Summary
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A General model of the Operations Function
Environment
Input
Resources
MATERIALS
CAPITAL
INFORMATION
Facilities
Staff
INPUTS
Performance
measurement and
customer
evaluation of
operations
processes
Developing an
Operations
Strategy
Design of
processes
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Improvement
of
processes
Transformation
Planning
and
Control of
Operations
Processes
FEEDBACK
OUTPUTS
Goods
and
Services
A General model of the Operations Function
OPERATION
INPUT
[resources]
TRANSFORMAT
ION
OUTPUT
Fast food
Meat,
Bread
Onions, Staff
Cooking
Burgers
University
Students
(main)
Examinations
Buildings
Teaching
Graduates
restaurants
Hungry
Well
Satisfied
customers(main)
Food/chef/staff
food
Agreeable
environment
customers
Officers
Crime
Peace
Information
prevention
Crime detection
Trust
Police service
Building
Vehicles
The
public
prepared
in law
Apprehend
criminals
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The Scope of Operations Management
Finance
Sales
HRM
POM
QA
Marketing
Engineering
MIS
Accounting
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Operations in an organisation
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Operations in an organisation
Product/services
development
function
Accounting
and finance
function
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A General model of the Operations Function
ANSWER: What is operations management?
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OM is the planning, organising and control of systems
which produce goods and services. It is one of the most
important managerial functions although some
managers may not refer to themselves as operations
managers. For instance a hotel manager may will not
refer to himself/herself as an operations managers.
Hospital administrators do not consider themselves as
operations managers. However, from the descriptions
contained in this presentation their activities are those of
OM.
Operations is therefore all about using resources and
providing value. Value in the form of products and
services.
TEN DECISION
AREAS ISSUES
• What good or service should we offer?
• How should we design these products?
1.
Service and product
design
2.
Quality management • Who is responsible for quality?
• How do we define the quality?
3. Process and capacity
• What process and what capacity will these design
products require?
• What equipment and technology is necessary for these
processes?
4.
Location
• Where should we put the facility?
• On what criteria should we base the location decision?
5.
Layout design
• How should we arrange the facility?
• How large must the facility be to meet our plan?
6.
Human resources
• How do we provide a reasonable work and job design
environment?
• How much can we expect our employees to produce?
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TEN DECISION
7.
Supply-chain
management
AREAS ISSUES
• Should we make or buy this component?
• Who are our suppliers and who can integrate into our
e-commerce program?
Inventory, MR & JIT • How much inventory of each item should we have?
• When do we reorder?
9. Intermediate and
short-term
• Are we better off keeping people on the payroll
scheduling during slowdowns?
• Which job do we perform next?
10. Maintenance
• Who is responsible for maintenance?
• When do we do maintenance?
8.
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A General model of the Operations Function
ANSWER: What are the activities of operations managers?
Direct responsibilities
–
Understanding the operation’s strategic objective
–
Developing an operations strategy for the organization
–
Designing the operation’s products, services and processes
–
Planning & control the operation
–
Improving the performance of the operation
 Indirect responsibilities
 Broad responsibilities
–
Globalization
–
Environmental protection
–
Social responsibility
–
Technology awareness
–
Knowledge management.
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Challenges for Operations Managers in Manufacturing
Organisations:
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• Global activity
• Global markets - Global procurement
• Logistics management a key function
• Extensive use of IT (example SAP, Oracle, BAAN)
• Supply Chain Management (horizontal integration)
• Strategic in outlook (alliances)
• Few big players (Car industry, Pharmaceuticals)
• Short product life cycles
• Need of high quality management - speed to market
.....key performance indicator, product characteristics..
Operations Management
Chapter 1: Operations Function





A general model of the operations functions
Operations management activities
History of the Operations function
Industrial & Post industrial society
Summary
15
The Heritage of operations management
1910: Scientific Management
Frederick Winslow Taylor (1856-1915):
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The Heritage of operations management
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1910: Scientific Management
Frederick Winslow Taylor (1856-1915):
1.
Break jobs down into their most elemental activities
2.
Simplify job designs so that limited skills were required to
learn a job, thus minimizing the time required for learning
3.
Fair day’s work
4.
Eliminate unnecessary motions
5.
Choose and train employees for best performance and for the
benefit of the company
6.
Management is responsible for the scientific analysis of the
production system and the way workers should perform their
jobs; while employees should perform their jobs accordingly
7.
There must be some kind of collaboration between employees
and management for the mutual benefit
The Heritage of operations management
1910: Scientific Management
Advantages of Scientific management:
 Increased output
 Lower labour cost
 Workers could easily be replaced and trained at low
cost, taking advantage of a large pool of cheap
unskilled labour shifting from farms to industry
 It allowed unskilled and uneducated workers to gain
employment based solely on their willingness to
work harder physically at jobs they were mentally
undemanding.
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The Heritage of operations management
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1910: Scientific Management
Disadvantages of Scientific management:
 Workers frequently became bored and dissatisfied with the
numbing repetition of simple job tasks that required little though,
ingenuity, or responsibility
 For Taylor, wages were the primary motivation for work, but
behaviour scientists proved that the psychological content of work
can be a more powerful motivating force for increased
productivity than pay
 Repetitive tasks requiring the same monotonous physical motions
can result in unnatural physical and mental fatigue.
 There is minimal opportunity for workers to interact with other
workers
 All the above lead to: tardiness, turnover, absenteeism and a
feeling of dissatisfaction.
The Heritage of operations management
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1910:Scientific Management
An underdeveloped economy today- or even
an “emerging” one – is one that has not – or at
least has not yet – made the manual worker
productive.
Peter Drucker, 1999
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The Heritage of operations management
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Henry L Gantt (1861-1919)
- bonus payment system
- Gantt diagram
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The Heritage of operations management
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Henry L Gantt (1861-1919)
Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)
They devoted much of their professional life to motion study, i.e.:
a. detailed study of operatives and the working environment
b. development of techniques which would help in devising the
“one best way” of carrying out any particular operation
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The Heritage of operations management
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Henry L Gantt (1861-1919)
Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)
1930s-40s: Human Relations and Mass production
Studies carried out at the Hawthorne plant of the Western
Electric Company between 1927 and 1932, under the
direction of a Harvard professor, Elton Mayo, who showed
that attention to technical details was not enough. It should
complimented by attention to the social factors in
organisations
Henry Ford introduced the revolutionary assembly line for
the production of historical Ford, T-model.
Results: 12,5 hours  93 min
$ 850
 $ 265.
The Heritage of operations management
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Henry L Gantt (1861-1919)
Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)
1930s-40s: Human Relations and Mass production
1950s-60s: Operations Research
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1970s: Widespread use of computers
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The Heritage of operations management
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Henry L Gantt (1861-1919)
Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)
1930s-40s: Human Relations and Mass production
1950s-60s: Operations Research
1970s: Widespread use of computers
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1980s:Influence of Japanese management practices
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Just-in-Time (JIT)
Kanban systems
Total Quality Management, TQM
Total Quality Control, TQC
The Heritage of operations management
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Henry L Gantt (1861-1919)
Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)
1930s-40s: Human Relations and Mass production
1950s-60s: Operations Research
1970s: Widespread use of computers
1980s: Influence of Japanese management practices
1990s: Increasing pace of services
TQM is widely adopted as well as ISO 9000
Theory Of Constraints, TOC
ERP,
BPR
Supply Chain, etc
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The Heritage of operations management
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Henry L Gantt (1861-1919)
Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)
1930s-40s: Human Relations and Mass production
1950s-60s: Operations Research
1970s: Widespread use of computers
1980s: Influence of Japanese management practices
1990s: Increasing pace of services
E-business,
Knowledge
Globalization
Management
&
GNP vs. GDP
• Primary
• Secondary
• Tertiary
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The National Economic Environment
YEAR:
2003
Sector
GDP (%)
Euro-area USA
Structure of employment (%)
World
Euro-area
USA
World
Primary
2
1
4
4.5
1
4
Secondary
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18.2
28
29.6
23
26
Tertiary
70
80.8
68
65.9
76
70
Source: Economist (2006), Pocket world in figures, London
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The National Economic Environment
Proportion of total employment
Trends in US employment from 1850-2000
90
80
70
60
50
40
30
20
Year
10
0
Year
Service;
Manufacturing;
Agriculture
Operations Management
Chapter 1: Operations Function





A general model of the operations functions
Operations management activities
History of the Operations function
Industrial & Post industrial society
Summary
31
Introduction to OM/History of Operations
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
Industrial society (1820 – 1920):
Post industrial society
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Introduction to OM/History of Operations
Industrial society (1820 – 1920):
 machines & production of goods dominated
the life of society
 (society divided into) Blue & white collar
workers
 workers start work in harmony with the daily
needs of the machine
 towns and cities were organized around
factory clusters
 life was paced around clocks, work schedules,
division of labor & market-demands
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Introduction to OM/History of Operations
Post industrial society:
 efficient
industrial production so goods
affordable to “average” worker
 emphasis shifts from quantity and cost 
good life
 emphasis on services & improved health and
education systems
 demand for greater technical and professional
skill levels from employers
 manufacturing is a mature activity while
service is dominated by variety
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4-Vs
Operations processes have different characteristics
Although all operations processes are similar in that
they all transform input resources into output products
and services, they do differ in a number of ways, four
of which are particular important, the 4-Vs:
• The Volume of their output
• The Variety of their output
• The Variation in the demand for their output
• The degree of Visibility which customers have of
the production of the product or service.
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Types of Operations Systems (manufacturing)
Variations in Volume
McDonald’s hamburgers

Repeatability (of tasks)

Specialization (of work)
High Volumes  Low Cost

Systemization (i.e. routine)
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Types of Operations Systems (manufacturing)
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Variations in Volume
Compare McDonald’s with a small Coffee Shop with
little dishes?
Types of Operations Systems (manufacturing)
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Variations in Volume
Compare McDonald’s with a small Coffee Shop with little dishes?
Coffee Shop:
Same items as Mac
Lower volume
Lower degree of repetition
Smaller number of staff who performs multiple tasks
Less specialization
Less specialized equipment
therefore Cost per burger higher (while price of burger may be
the same)
Types of Operations Systems (manufacturing)
Variations in Variety
Compare a taxi company with Bus service
Taxi company offers a high-variety service:

Picks you up from anywhere

Takes you anywhere

Follow any route you want
but with a higher cost than bus (which has regular service with
well-defined routes)
thus
High Variety  High Cost
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The Visibility dimension
• visibility means exposure
• customer contact skills
• front office vs. back office
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The Variation dimension
Summer holidays in an island vs. winter in an island
Variation in demand affects the capacity, so:
• Extra staff for the summer period?
• Overtime?
Hotel next to a motorway:
• Level demand,
so
• Planning of activities well in advance (e.g. staff scheduled, food
and rooms …….in a routine and predictable manner)
therefore
• High utilization of resources
therefore
• unit costs are lower
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Formula 1
vs.
Small island resort
• For about 10–20 visitors
Island resort hotel
Formula 1
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
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Island resort
hotel
Formula 1
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
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Products & Services
Differences Between Products & Services
PRODUCTS
SERVICES
Tangible Intangible
Standardized Heterogeneous
Minimum contact with end user
Direct contact with end user
Complicated production operation Simple production operation
Regional, national, Local markets
international markets
Large systems, able to achieve Normally, small system
“economies of scale”
Can be kept as an inventory Offered only during its
production process
Perishability Non - Perishability
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Differences Between Products & Services
QUESTION: Put them in order
1. Haircut
2. Medical advice
3. Washing machine
4. cd player
5. Cars
6. Petrol
7. MBA
8. Legal advice
9. Tires
10. Financial advice
11. Restaurant meal
12. Car insurance policy
Tangible
Intangible
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Differences Between Products & Services
ANSWER
1. Petrol
2. Cars
3. Tires
4. cd player
5. Washing machine
6. Restaurant meal
7. Haircut
8. MBA
9. Car insurance policy
10. Medical advice
11. Legal advice
12. Financial advice
Tangible
Intangible
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END