Introduction: Operations

Management
Some material have been adopted from OM sources such as Heizer & Render (2014);
Stevenson (2012), Russell & Taylor (2011)

Cases of select companies that have

excelled
in
Operations
Company
Core Competency

Paradigm shift in Quality! Lean manufacturing, short

design-to-market cycles
Strategic Sourcing
Distribution systemEvery Day Low Prices
QVSC, Location, layout, supplier development
Guaranteed Delivery, Hub and spoke system
Supply chain management and mass customization

Essential Functions of Business

Essential functions:
Marketing generates demand, provides
customer and market information
Finance/accounting tracks how well the
organization is doing, invests money, arranges
working capital, pays bills, collects the money
Production/operations creates the product
and/or delivers the service
Support functionsaccounting, human
resources, information systems, purchasing,
engineering, etc.

The Production System

Operations Management (O.M.)

It is the systematic direction and control of the processes that
convert inputs into finished goods and services.
O.M. is the proper utilization and management of the
five Ps of a business:
People
Products
Plant
Processes
Production

Workforce
Inventory
Machines, equipment and building
Methods required for the conversion process
The actual conversion process (mfg. and service)

The Operations function in many businesses can control up to 70 %

of the businesss assets

Operations Activities

Strategy
Output Planning
Capacity Planning
Facility Location
Facility Layout
Aggregate Planning

Inventory Management
Materials Requirements
Planning
Scheduling
Quality Control

What is Operations Management?

Definition:
OM organizes, plans, controls, and improves the
use of process, inventory, workforce, and facility
& equipment in order to determine the ranking of
the competitive priorities--price, quality,
dependability, flexibility, and time--thereby
providing short-term profit, long-term profit and
improved market share (Finch and Luebbe, 1995)

Competitive Advantage
Competitive Advantage

Value Activities

Resources

Capabilities

OM: Adding Value

Significant Events in OM

Competitive Priorities

Competing on Cost
Competing on Quality
High performance design
Consistent quality

Competing on Flexibility
Customization
Volume/product-mix Flexibility

Competing on Time
Fast delivery
On time delivery
Development speed

Dependability

Manufacturing vs. Service

High

Characteristic

Manufacturing Service

Output

Tangible

Intangible

Customer contact

Low

High

Uniformity of input

High

Low

Labor content

Low

High

Uniformity of output

High

Low

Measurement of productivity

Easy

Difficult

Opportunity to correct quality

problems before delivery to
customer

High

Low

Manufacturing vs. Service (cont.)

Characteristic
Response Time
Capital Intensity
Markets
Consumption

Mgf
Long
High
Diverse
Delayed

Service
Short
Low
Local
Immediate

These differences are beginning to fade

in many cases

Facilitating Good Concept

Often confusion in trying to classify
organization as manufacturer or service
Facilitating good concept avoids this
ambiguity
All organizations defined as service
The tangible part of the service is defined
as facilitating good
Pure services

New Trends in OM
Past

Causes

Future

Local or
national focus

Reliable worldwide
communication and
transportation networks

Global focus

Batch/large
shipments

Short product life cycles and

cost of capital put pressure
on reducing inventory

Just-in-time
performance

Low-bid
purchasing

Supply chain competition

requires that suppliers be
engaged in a focus on the
end customer

Supply chain
partners,
collaboration,
alliances

New Trends in OM
Past

Causes

Future

Lengthy
product
development

Shorter life cycles, Internet,

rapid international
communication, computeraided design, and
international collaboration

Rapid product
development,
alliances,
collaborative
designs

Standardized
products

Affluence and worldwide

markets; increasingly flexible
production processes

Mass
customization
with added
emphasis on
quality

Job
specialization

Changing socioculture
milieu; increasingly a
knowledge and information
society

Empowered
employees,
teams, and lean
production

Additional Trends

Service Sector Growth (80+ jobs)

Surge in Service Productivity
Global competition
Competition based on
Quality
Time Reduction
Technology

Flexibility and Economies of Scope

Recent Trends (Continued)

Worker involvement
Emphasis on supply chain management
Reengineering
Environment, Ethical, and Workforce Diversity
The Experience Economy (Pine & Gilmore, 1999)
Businesses must orchestrate memorable events for
their customers, they argue, and that memory itself
becomes the product - the "experience".

Mass Customized service

Classification and Evolution of

Economic Offerings

Ethics and
Social Responsibility
Challenges facing operations
managers:
Developing and producing safe, quality
products
Maintaining a clean environment
Providing a safe workplace
Honoring community commitments