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Operations Management 2
Operations Management 2
Introduction to
Operations
Management
McGraw-Hill/Irwin
Learning Objectives
1-2
Learning Objectives
Differentiate between design and operation
of production systems
Describe the key aspects of operations
management decision making
Briefly describe the historicalevolution of
operations management
Identify current trends that impact operations
management
1-3
Operations Management
Operations Management is:
The management of systems or processes
that create goods and/or provide services
1-4
The Organization
Figure 1.1
Finance
Operations
Marketing
1-5
Value-Added Process
Figure 1.2
Transformation/
Conversion
process
Outputs
Goods
Services
Feedback
Control
Feedback
Feedback
1-6
1-7
Goods-service Continuum
Figure 1.3
Goods
Service
Surgery, teaching
Song writing, software development
Computer repair, restaurant meal
1-8
Food Processor
Table 1.2
Inputs
Processing
Outputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned
vegetables
1-9
Hospital Process
Table 1.2
Inputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Processing
Outputs
Examination
Surgery
Monitoring
Medication
Therapy
Healthy
patients
1-10
Manufacturing or Service?
Tangible
Act
1-11
Government
Wholesale/retail
Financial services
Healthcare
Personal services
Business services
Education
1-12
Key Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
1-13
Key Differences
6. Production and delivery
7. Quality assurance
8. Amount of inventory
9. Evaluation of work
10. Ability to patent design
1-14
Goods vs Service
Characteristic
Customer contact
Uniformity of input
Labor content
Uniformity of output
Output
Measurement of productivity
Opportunity to correct problems
Inventory
Evaluation
Patentable
Goods
Low
High
Low
High
Tangible
Easy
High
Much
Easier
Usually
Service
High
Low
High
Low
Intangible
Difficult
Low
Little
Difficult
Not usual1-15
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
Supply chain management
And more . . .
1-16
Types of Operations
Table 1.4
Operations
Examples
Goods Producing
Figure 1.4
Percent
02
Year
Mfg. Service
45
79
21
90
Mfg.
50
72
28
80
Service
55
72
28
70
60
68
32
60
65
64
36
50
70
64
36
40
75
58
42
30
80
44
46
20
85
43
57
10
90
35
65
0
95
25
75
45 50 55 60 65 70 75 80 85 90 95 00 02 05
00
30
70
Year
25
75
1-18
Outsourcing
Some manufacturing work has been outsourced
to more productive companies
1-19
1-21
Challenges of Managing
Services
Service jobs are often less structured than
manufacturing jobs
Customer contact is higher
Worker skill levels are lower
Services hire many low-skill, entry-level workers
Employee turnover is higher
Input variability is higher
Service performance can be affected by workers
personal factors
1-22
Operations Management
Decision Making
Models
Quantitative approaches
Analysis of trade-offs
Systems approach
Establishing priorities
Ethics
1-23
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
1-24
Decision Making
System Design
capacity
location
arrangement of departments
product and service planning
acquisition and placement of
equipment
1-25
Decision Making
System operation
personnel
inventory
scheduling
project
management
quality assurance
1-26
Decision Making
Models
Quantitative approaches
Analysis of trade-offs
Systems approach
1-27
Models
A model is an abstraction of reality.
Physical
Schematic
Mathematical
Tradeoffs
1-28
1-29
Limitations of Models
Quantitative information may be emphasized
over qualitative
Models may be incorrectly applied and
results misinterpreted
Nonqualified users may not comprehend the
rules on how to use the model
Use of models does not guarantee good
decisions
1-30
Quantitative Approaches
Linear programming
Queuing Techniques
Inventory models
Project models
Statistical models
1-31
Analysis of Trade-Offs
Decision on the amount of inventory to stock
Increased cost of holding inventory
Vs.
Level of customer service
1-32
Systems Approach
The whole is greater than
the sum of the parts.
Suboptimization
1-33
Pareto Phenomenon
A few factors account for a high
percentage of the occurrence of some
event(s).
80/20 Rule - 80% of problems are caused
by 20% of the activities.
1-34
Ethical Issues
Financial statements
Worker safety
Product safety
Quality
Environment
Community
Hiring/firing workers
Closing facilities
Workers rights
1-35
Operations
Marketing
Finance
1-36
Operations Interfaces
Industrial
Engineering
Maintenance
Distribution
Purchasing
Operations
Public
Relations
Legal
Personnel
Accounting
MIS
1-37
Table 1.7
Trends in Business
Major trends
1-39
Management Technology
Technology: The application of scientific
discoveries to the development and
improvement of goods and services
Product and service technology
Process technology
Information technology
1-40
Direct
Suppliers
Producer
Distributor
Final
Consumer
1-41
Value of
Product
$0.15
$0.15
$0.08
$0.23
$0.15
$0.38
$0.08
$0.46
$0.54
$1.00
$0.08
$1.08
$0.21
$1.29
Total Value-Added
$1.29
Stage of Production
1-42
Ethical behavior
Operations strategy
Working with fewer resources
Revenue management
Process analysis and improvement
Increased regulation and product liability
Lean production
1-43