Introduction to Production & Operations Management
…is the study and development of techniques for the formulation and analysis of management and related business problems. Operations research models are often helpful in this process.
…is the application of techniques developed in mathematics, statistics, engineering and the physical sciences to the solution of problems in business, government, industry, economics and the social sciences.
…employ mathematical models to reach a wide variety of business decisions.
They give modern managers a competitive edge Managers do not need to have great mathematical skills Familiarity allows one to:
Ask the right questions Recognize when additional analysis is necessary Evaluate potential solutions Make informed decisions
technology. footprints. qualitative methods come in many varieties.
. etc. their other behaviors. Different researchers focus on different sources of data:
One's own immediate experience Others' experiences. however. artwork. which we might seek to understand through:
their speech or writing. their products .Qualitative Methods
…like more traditional methods.
What is POM?
Production is the creation of goods and services Production and/or Operations Management are the activities that transform resources into goods and services
It shows us how goods and services are produced It shows us what POM managers do It is the most costly part of any organization
. pays bills.Why Study POM?
It is one of the 3 critical parts of any organization:
Marketing – generates demand Operations – creates the product Finance/accounting – tracks organizational performance.
etc.Cost as a Percentage of Sales
Meat Packing Furniture Manufacturing Restaurant Heavy Equipment
8 3 90
15 22 77
20 16 74
12 23 77
. Profits. G & A Int.
Construction Federal Government Mining
Manufacturing Retail Trade
State & Local Gov't Finance.S.
6% 6% 5%
Education. Public Util. Insurance
Wholesale Trade Transport. Health.Jobs in the U.
Jobs in POM
Less than 20% of all jobs are in manufacturing (and they are declining) Almost 80% of jobs are in the service sector (and they are increasing) Nearly half of all jobs are in POM Most POM jobs are professional and/or managerial
product design……………. 8 Ch. 5 Ch. 3. 4 Ch. 7.. 14. Scheduling ………………………….………………… Layout design ……………………….. 7S Ch. 9 Ch.. 11s Ch. 10. 6S Ch. Supply-chain management………… Inventory management ……………. 13. 11.. 15 Ch... Location . Maintenance ..…………. 10S Ch. 6. 16 Ch. 17
. Human resources. capacity design………….. job design……. 12.Chapters Covered in Text
Ch. Quality management………………… Process.
The Critical Decisions
Who is responsible for quality? How do we define quality?
and product design
What product or service should we offer? How should we design these products and services?
and capacity design
What processes will these products require and in what order? What equipment and technology is necessary for these processes?
Where should we put the facility On what criteria should we base this location decision?
.The Critical Decisions .
How should we arrange the facility? How large a facility is required?
resources and job design
How do we provide a reasonable work environment? How much can we expect our employees to produce?
.The Critical Decisions .
Should we make or buy this item? Who are our good suppliers and how many should we have?
How much inventory of each item should we have? When do we re-order?
.The Critical Decisions .
Intermediate.The Critical Decisions .
short term. and project
Is subcontracting production a good idea? Are we better off keeping people on the payroll during slowdowns?
Who is responsible for maintenance? When do we do maintenance?
for muskets (1798)
Some doubt about true interchangeability Simeon North (Middletown) John Hall (Harpers Ferry)
. The Wealth of Nations.Significant Events in POM
Division of labor (Adam Smith. 1765 1825)
Cotton Gin (1792) Contract with U. 1776) Industrial Revolution Standardization of parts (Eli Whitney.S.
The Principles of Scientific Management.)
Scientific management (Frederick Taylor 1865 . 1911
Match employees to jobs Provide the proper training Provide the proper methods and tools Establish legitimate incentives
.Significant Events in POM (cont.
so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks
.Significant Events in POM (cont. and develop each worker rather than passively leaving them to train themselves Cooperate with the workers to ensure that the scientifically developed methods are being followed Divide work nearly equally between managers and workers.)
Taylor’s 4 Principles of Scientific Management:
Replace rule-of-thumb work methods with methods based on a scientific study of the tasks Scientifically select. train.
Coordinated assembly line (Henry Ford 1863 1947) Gantt charts (Henry Gantt 1861-1919) Motion studies (Frank and Lillian Gilbreth. 1922) Quality control (Shewhart. Feigenbaum.Significant Events in POM (cont. Deming.) CAD Flexible manufacturing systems (FMS) Computer integrated manufacturing (CIM)
New Challenges in OM
Local or national focus Batch shipments Low bid purchasing Lengthy product development cycles Standardized products Job specialization
Global focus Just-in-time Supply chain partnering Rapid product development Strategic alliances Mass customization Empowered employees Teams
Goods vs. Services
Characteristics of Goods
Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction
© 1995 Corel Corp.
.Characteristics of Services
Intangible product Produced & consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed
© 1995 Corel Corp.
Goods Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Service Reselling unusual Difficult to inventory Quality difficult to measure
is part of
Product is transportable Site of facility important for cost
Often easy to automate Revenue generated primarily from tangible product
Provider.Goods vs. Services . not product is transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from intangible service
Goods Contain Services / Services Contain Goods
Automobile Computer Installed Carpeting Fast-food Meal Restaurant Meal Auto Repair Hospital Care Advertising Agency Investment Management Consulting Service Counseling 100
Percent of Product that is a Good
Percent of Product that is a Service
New Challenges in Operations Management
. computer-aided design.Changing Challenges for the Operations Manager
Local or national focus Batch (large) shipments Low-bid purchasing Lengthy product development
Low-cost. reliable worldwide communication and transportation networks Cost of capital puts pressure on reducing investment in inventory Quality emphasis requires that suppliers be engaged in product improvement Shorter life cycles. rapid international communication. and international collaboration
Global Focus Just-in-time shipments Supply-chain partners Rapid product development. alliances.
Changing Challenges for the Operations Manager
The Productivity Challenge
The economic system transforms inputs to outputs at about an annual 2.5% increase in productivity (capital 38% of 2.The Economic System Transforms Inputs to Outputs
Goods and Services
. labor (10% of 2. management (52% of 2. Capital.
Measure of process improvement Represents output relative to input
Units produced = Input used
Only through productivity increases can our standard of living improve
000 pins per day if each of eighteen specialized tasks was assigned to particular workers.Adam Smith on Productivity
…He asserted that ten workers could produce 48.
. a worker would be lucky to produce even one pin per day.800 pins per worker per day. Average productivity: 4. But absent the division of labor.
Ford realized he'd need a more efficient way to produce the Model T in order to lower the price. Henry Ford announced his goal for the Ford Motor Company: to create "a motor car for the great multitude. He and his team looked at other industries and found four principles that would further their goal:
Interchangeable parts Continuous flow Division of labor Reducing wasted effort
. automobiles were expensive." At that time. custom-made machines.Henry Ford on Productivity
his methods allowed them to lay 350 bricks. On one particularly difficult type of wall.Frank Gilbreth on Productivity
…improved a five-thousand-year-old job and had enabled bricklayers to lay brick faster with less effort and fatigue. an increase in productivity of over 190%.
. where the previous record had been 120 bricks per hour.
One of W. promoting the utilization of his own creation: the SPC chart. he preached the importance of adapting management processes to create profitable situations for both businesses and consumers.Walter Shewhart on Productivity
…the original notions of Total Quality Management and continuous improvement trace back to a former Bell Telephone employee named Walter Shewhart. Edwards Deming's teachers.
Average worker's annual cash compensation increased
115 110 105 100 95 Year A Year B Year C
24000 Year A Year B Year C Year A Year B Year C
.75 $1.00 $1.Impact of Quality Improvement
Productivity improved Costs were pared Wages increased
Parts per man hour
Cost per unit decreased
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
contributes about 52% of the annual increase
.contributes about 32% of the annual increase Management .Productivity Increase
.contributes about 10% of the annual increase Capital .
Key Variables for Improved Labor Productivity
education appropriate for the labor
force Diet of the labor force Social overhead that makes labor available Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
Comparison of Productivity
labor intensive Frequently individually processed Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality
U. is becoming more of a knowledge intensive service economy Globalization Total Quality Control Need for flexibility and innovation