Transcript Introduction to Operations Management Chapter 1 Learning Objectives  You should be able to: 1.

Introduction to Operations
Management
Chapter 1
Learning Objectives
 You should be able to:
1. Define the term operations management (scope)
2. Identify the three major functional areas of organizations and
describe how they interrelate
3. Identify similarities and differences between production and
service operations
4. Describe the operations function and the nature of the
operations manager’s job
5. Explain the key aspects of operations management decision
making (definition of models)
6. Briefly describe the historical evolution of operations
management
7. Characterize current trends in business that impact operations
management
Instructor Slides
2
Organizations
The 3 Basic Functions
Organization
Marketing
Operations
Finance
1-3
Operations Management
• What is Operations?
– The part of a business organization that is
responsible for producing goods or services
• What is Operations Management?
– The management of systems or processes that
create goods and/or provide services
• Operations Management affects:
– Companies’ ability to compete
1-4
The Operations function involves the conversion of inputs into outputs
Value-Added
Inputs
•Land
•Labor
•Capital
•Materials
•Information
Measurement
and Feedback
Transformation/
Conversion
Process
= value/price of output - cost of input
Outputs
•Goods
•Services
Measurement
and Feedback
Measurement
and Feedback
Control
Feedback = measurements taken at various points in the transformation process
Control = The comparison of feedback against previously established
standards to determine if corrective action is needed.
1-5
Why Study OM?
• Every aspect
of business
affects or is
affected by
operations
• There is a
significant
amount of
interaction
and
collaboration
amongst the
functional
areas
Industrial
Engineering
Maintenance
Distribution
Purchasing
Operations
Public
Relations
Legal
Personnel
Accounting
MIS
1-6
Business Operations Overlap
Operations
Marketing
Finance
1-7
Manufacturing vs. Service
Manufacturing and Service Organizations differ chiefly because:
• Manufacturing is goods-oriented
• Service is act-oriented.
Goods
Services
Tangible
Act-Oriented
1-8
Good or Service?
• Goods
– physical items that include raw materials, parts,
subassemblies, and final products.
•
•
•
•
Automobile
Computer
Oven
Shampoo
• Services
– activities that provide some combination of time,
location, form or psychological value.
•
•
•
•
Air travel
Education
Haircut
Legal counsel
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Goods-service Continuum
Products are typically neither purely service- or purely goodsbased.
Goods
Services
Surgery, Teaching
Songwriting, Software Development
Computer Repair, Restaurant Meal
Home Remodeling, Retail Sales
Automobile Assembly, Steelmaking
Products package = combinations of goods and services
1-10
Key Differences
Characteristic
Customer contact
Uniformity of input
Labor content of jobs
Uniformity of output
Production and delivery (Output)
Measurement of productivity
Quality assurance
Goods
Low
High
Low
High
Tangible
Easy
High
Service
High
Low
High
Low
Intangible
Difficult
Low
Much
Easier
Usually
Little
Difficult
Not usual1-11
(Opportunity to correct problems)
Amount of inventory
Evaluation of work
Ability to patent design
Scope of Operations Management
The operations function includes many interrelated
activities such as:









Forecasting
Capacity planning
Facilities and layout
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
And more . . .
The scope of operations management ranges across
the organization.
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Role of the Operations Manager
The Operations Function consists of all activities
directly related to producing goods or providing
services.
A primary function of the operations manager is to
guide the system by decision making.
– System Design Decisions
– System Operation Decisions
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System Design Decisions
• System Design
– Capacity
– Facility location
– Facility layout
– Product and service planning
– Acquisition and placement of equipment
• These are typically strategic decisions that
• usually require long-term commitment of
resources
• determine parameters of system operation
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System Operation Decisions
• System Operation
• These are generally tactical decisions
– Management of personnel
– Inventory management and control
– Scheduling
– Project management
– Quality assurance
• Operations managers spend more time on system
operation decision than any other decision area
• They still have a vital stake in system design
1-15
Decision Making
 Most operations decisions involve many alternatives
that can have quite different impacts on costs or
profits
 Typical operations decisions include:
 What: What resources are needed, and in what amounts?
 When: When will each resource be needed? When should
the work be scheduled? When should materials and other
supplies be ordered?
 Where: Where will the work be done?
 How: How will he product or service be designed? How will
the work be done? How will resources be allocated?
 Who: Who will do the work?
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Processes
Managing to Meet Demand
Operations &
Supply Chains
Supply
Supply
Supply
Sales & Marketing
>
Demand
Wasteful
Costly
<
Demand
Opportunity Loss
Customer
Dissatisfaction
=
Demand
Ideal
1-17
Processes
Variation
Four Sources of Variation:
Variety of goods or services
being offered
The greater the variety of goods and services
offered, the greater the variation in production
or service requirements.
Structural variation in demand
These are generally predictable (e.g.,
seasonal variation).
They are important for capacity planning
Random variation
Natural variation that is present in all
processes (e.g., random demand etc.).
Generally, it cannot be influenced by
managers.
Assignable variation
Variation that has identifiable sources. (e.g.,
defective inputs, incorrect work methods,
equipment etc.)
This type of variation can be reduced, or
eliminated, by analysis and corrective action.
• Variations can be disruptive to operations and supply chain processes.
• They may result in additional costs, delays and shortages, poor quality,
and inefficient work systems.
1-18
General Approach to Decision Making
• Modeling is a key tool used by all decision
makers
– Model:
• an abstraction of reality; a simplification of
something.
– Common features of models:
• They are simplifications of real-life phenomena
• They omit unimportant details of the real-life systems
they mimic so that attention can be focused on the
most important aspects of the real-life system
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Models
• Types of Models:
– Physical Models
• Look like their real-life counterparts
– Schematic Models
• Look less like their real-life counterparts than
physical models (graphs, charts, blueprints,
drawings, etc.)
– Mathematical Models
• Do not look at all like their real-life counterparts
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Quantitative Methods
• A decision making approach that frequently
seeks to obtain a mathematically optimal
solution
–
–
–
–
–
–
Linear programming
Queuing techniques
Inventory models
Project models
Forecasting techniques
Statistical models
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Benefits of Models
1. Models are generally easier to use and less
expensive than dealing with the real system
2. Require users to organize and sometimes
quantify information
3. Increase understanding of the problem
4. Enable managers to analyze “What if?” questions
5. Serve as a consistent tool for evaluation and
provide a standardized format for analyzing a
problem
6. The power of mathematics
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Limitations of Models
1. Quantitative information may be
emphasized over qualitative
2. Models may be incorrectly applied and
results misinterpreted
3. Nonqualified users may not comprehend
the rules on how to use the model
4. Use of models does not guarantee good
decisions
1-23
Historical Evolution of OM
•
•
•
•
Industrial Revolution
Scientific Management
Decision Models and Management Science
Influence of Japanese Manufacturers
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Industrial Revolution
• Pre-Industrial Revolution
– Craft production - System in which highly skilled workers
use simple, flexible tools to produce small quantities of
customized goods
• The Industrial Revolution (late
18th century)
• Began in England in the 1770s
• Division of labor - Adam Smith,
1776
• Application of the steam engine,
1780s
• Cotton Gin and Interchangeable
parts - Eli Whitney, 1792
• Substituting machine power for
human power.
• Management theory and practice did not advance appreciably
during this period
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Scientific Management
• Early 20th century.
• Believed in a “science of management” based on observation,
measurement, analysis and improvement of work methods, and
economic incentives
• Management is responsible for:
• planning, carefully selecting and training workers
• finding the best way to perform each job
• Emphasis was on maximizing output
• Ford Model-T, 1908-1927
• Modern-Times, 1936
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Decision Models &
Management Science
• Mid 20th century.
• OR applications in warfare - Operations Research
(OR) Groups
• Mathematical model for inventory management
(F.W. Harris, 1915)
• Statistical procedures for sampling and quality
control (Dodge, Romig & Shewart , 1930s)
• Statistical sampling theory (Tippett, 1935)
• Linear programming (George Dantzig , 1947)
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Influence of Japanese Manufacturers
• Late 20th century
• Refined and developed management
practices that increased productivity
– Credited with fueling the “quality revolution”
– Lean Operations / Just-in-Time production
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Key Issues for Operations Managers
Today
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•
•
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•
•
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Economic conditions
Innovating
Quality problems
Management technology
The Internet, e-commerce, e-business
Supply chain management
Risk management
Revenue management
Competing in a global economy
– Globalization, Outsourcing
• Environmental concerns
• Ethical behavior
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