Introduction to Production and Operations Management The Operations Definition Operations as a basic function Operations as a transformation process Operations

as the technical core The Operation As A Basic Function Operations function is about the arrangement of resources which are devoted to the production and delivery of its product and services. Operations As A Transformation Process – nasa scratch THE 5 Ps or THE 5 Ms of OM 5 Ps 5 Ms People Manpower Plants Machines Parts Money Processes Materials Planning Methods and and Control Management Transformation Processes Physical (manufacturing) Locational (transportation/ warehouse) Exchange (retail) Physiological (health care) Psychological (entertainment) Informational (communications) Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction Characteristics of Services Intangible product Inconsistent product definition Produced & consumed at same time Cannot be inventoried High customer interaction Operations as the Technical Core – nasa handout Definition of Operations Management • Management of an organization's production system – Production system converts inputs into goods & services • OPERATIONS MANAGEMENTPLANNING • ORGANIZING • STAFFING • DIRECTING and • CONTROLLING of activities relating to the creation of goods and services through the transformation of inputs into outputs Definition of Operations Management ⇒ The design, operation, and improvement of production systems that create the firm’s primary products or services. ⇒ The design and control of the systems responsible for the productive use of raw materials, human resources,

equipment, and facilities in the development of a product or services. DESIRABLE FEATURES OF THE PROCESS • LOW COST • HIGH QUALITY • FLEXIBILITY • SPEED OF DELIVERY • INNOVATION • ENVIRONMENTALLY ACCEPTABLE The Three Necessary Functions To create goods and services, all organizations require three functions: 1. Marketing - generates demand; takes order 2. Production/Operations - creates the goods or service 3. Accounting - tracks the performance of organization, pays bills, collects money Competitiveness - The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens. - How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services Productivity = output/Input • A measure of the effective use of resources, usually expressed as the ratio of output to input. Productivity improves when firms:  Become more efficient  Downsize  Expand  Retrench  Achieve breakthroughs Measures of Competitiveness  Productivity  GDP (Gross domestic product) growth  Market capitalization  Technological infrastructure  Quality of education  Efficiency of government Barriers to Entry Economies of scale  Capital investment  Access to supply and distribution channels  Learning curves Marketing influences competitiveness in several ways: 1. Identifying consumer wants and/or needs. 2. Pricing 3. Advertising and promotion Operations influences competitiveness in several ways: 1. Product & service designs 2.Cost 3. Location 4. Quality 5. Quick response 6. Flexibility 7. Inventory management 8. Supply chain management

Productivity Yield • The ratio of output of god product to the quantity of raw material input. Financial resources 4. Factors that affect Productivity: • Standardizing • Quality differences • Use of the Internet • Computer viruses • Searching for lost or misplaced items wastes • Scrap rates • New workers • Safety • A shortage of information technology workers and other technical workers • Layoffs • Design of the workspace Forecasting –refer to handout  Focus on supply chain management  Short term role of product demand  Long term role of new products. Technology 7. Goals serve as a foundation for the development of organizational strategies. Facilities and equipment 3. that is used to guide the operations function. Technology 5. • Can be used to judge the performance of an entire industry or the productivity of a country as a whole. Price 2. Legal environment 4. Tactics are methods and actions used to accomplish strategies. Quality 3. Customers 5. Mission Statement states the purpose of an organization. Service 10. Competition 6. Time 4. • Productivity Measure • Can be used to track performance over time. Products and services 6. Flexible operations. Economic conditions 2. processes. Order Winners • Those characteristics of an organization’s good or services that cause them to be perceived as better than the competition. Political conditions 3. Quality-based Strategies Focus on maintaining or improving the quality of an organization’s products or services. and technologies  Focus on Total Quality Management  Satisfy customer demand  Uninterrupted product flow with no defective items . consistent with the organization strategy. Suppliers Operations Strategy • The approach. Organizations have achieved time reduction in some of the following: • Planning Time • Product/Service Design Time • Processing Time • Changeover Time • Delivery Time • Response Time for Complaints Balance Scorecard • It is a top-down management system that organizations can use to clarify their vision and strategy and transform them into action. Service 6. Strategies are plans for achieving organizational goals. Time-based Strategies • Focus on reducing the time required to accomplish various activities. Key External Factors 1. Specialization Newness. High quality Service. Flexibility 5. Here are some examples of different strategies an organization might choose from: Low cost. Managers and workers Mission is the reason for the existence of an organization. Productivity Growth • The increase in productivity from one period to the next relative to the productivity in the preceding period. Human Resources 2. Scale-based Strategies. Sustainability Strategy Factors 1.9. Location Strategy Formulation SWOT Approach • Strength • Weaknesses • Opportunities • Threats Order Qualifiers • Those characteristics that potential customers perceive as minimum standards of acceptability for a product to be considered for purchase. Markets Key Internal Factors 1.

 You can pick models based on: 1. Time horizon to forecast 2. Executive Judgement. Accuracy required 4. productsand markets  Demand Behavior  Trend-gradual. Historical Analogy. Necessary for strategic planning Components of Forecasting DemandTime Frame  Short-range to mediumrange. Data availability 3. services and the processes which produce them all have to be designed Decisions taken during the design of a product or service will have an impact on the decisions taken during the design of the process which produces those products or services and vice versa. marketing. Size of forecasting budget 5. Delphi Method. Panel Consensus  Quantitative  Time Series Analysis  Causal Relationships  Simulation Time Series Analysis  Time series forecasting models try to predict the future based on past data. -perform -reliable -easy Operations managers tend to focus on the design of the transformation process Finished designs which are: High quality: Error-free designs which fulfil their purpose in an effective and creative way Speedily produced: Designs which have moved from concept to detailed specification in a short time Dependably delivered: Designs which are delivered when promised Produced flexibly: Designs which include the latest ideas to emerge during the process Low cost: Designs produced without consuming excessive resources Objectives of Product and Service Design  Main focus  Customer satisfaction  Secondary focus  Function of product/service  Cost/profit  Quality  Appearance  Ease of production/assembly  Ease of maintenance/service Product Liability . expertise. purchasing. smooth out changes • Use when demand is stable with no trend or seasonal pattern • The simple moving average model assumes an average is a good estimator of future behavior. Designers Adhere to Guidelines  Produce designs that are consistant with the goals of the company  Give customers the value they expect  Make health and safety a primary concern  Consider potential harm to the environment Other Issues in Product and Service Design  Product/service life cycles  How much standardization  Product/service reliability  Range of operating conditions Standardization .periodic oscillation in demand which repeats  random. long-term up or down movement  Cycles-up & down movement repeating over long time frame  seasonal patterns. Availability of qualified personnel Moving Average • Average several periods of data • pattern Types of Forecasts  Qualitative (Judgmental)  Management judgment.A manufacturer is liable for any injuries or damages caused by a faulty product.Products carry an implication of merchantability and fitness. Forecast Control  Reasons for out-of-control forecasts  Change in trend  Appearance of cycle  Weather changes  Promotions  Competition  Politics Product and Service design Nature & Purpose of the Design Activity Products.daily. Grass Roots. Major factors in design strategy  Cost  Quality  Time-to-market  Customer satisfaction  Competitive advantage The Purpose of Design is to Satisfy Customers Product designers will seek to create things that: -are aesthetically pleasing. Market Research. engineering Ex. weekly monthly forecasts of sales data Up to 2 years into the future  long-range – beyond 2 yr strategic planning of goals. Uniform Commercial Code . opinion  Use management. -satisfy -meet expectations.

Benetton Modular design. but incorporating some degree of customization  Delayed differentiation (Postponement) -a concept in supply chain management where the manufacturing process starts by making a generic or family product that is later differentiated into a specific end-product.  Determines:  factors that are controllable and those not controllable  their optimal levels relative to major product advances Reverse engineering is the dismantling and inspecting of a competitor’s product to discover product improvements.  Decreased variety results in less consumer appeal.Extent to which there is an absence of variety in a product.  Applied Research achieves commercial applications.  Development converts results of applied research into commercial applications. or system to perform its intended function under a prescribed set of conditions  Failure: Situation in which a product.  Manufacturability is the ease of fabrication and/or assembly which is important for:  Cost  Productivity  Quality  Beyond the overall objective to achieve customer satisfaction while making a reasonable profit is:  Design for Manufacturing(DFM)  The designers’ consideration of the organization’s manufacturing capabilities when designing a product.  Central feature is Parameter Design.  High cost of design changes increases resistance to improvements. part. Computers Modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged.Producing but not quite completing a product or service until customer preferences or specifications are known E. It allows:  easier diagnosis and remedy of failures  easier repair and replacement  simplification of manufacturing and assembly  Reliability: The ability of a product. and inspection procedures  Orders fillable from inventory  Opportunities for long production runs and automation  Need for fewer parts justifies increased expenditures on perfecting designs and improving quality control procedures. or system does not perform as intended conditions under which an item’s reliability is specified Product Design  Product Life Cycles  Robust Design  Concurrent Engineering  Computer-Aided Design  Modular Design Robust Design: Design that results in products or services that can function over a broad range of conditions Taguchi Approach Robust Design  Design a robust product  Insensitive to environmental factors either in manufacturing or in use.g. Disadvantages of Standardization  Designs may be frozen with too many imperfections remaining. Mass customization -A strategy of producing standardized goods or services. service or process  Standardized products are immediately available to customers Advantages of Standardization  Fewer parts to deal with in inventory & manufacturing  Design costs are generally lower  Reduced training costs and time  More routine purchasing. handling. part.  The more general term design for operations encompasses services as well as manufacturing Concurrent engineering is the bringing together of engineering design and  Normal operating conditions: The set of . Delayed differentiation is a postponement tactic . Research & Development (R&D)  Organized efforts to increase scientific knowledge or product innovation & may involve:  Basic Research advances knowledge about a subject without near-term expectations of commercial an approach that subdivides a system into smaller parts (modules) that can be independently created and then used in different systems to drive multiple functionalities E.

manufacturing personnel early in the design phase. and skills needed to provide a service  Product bundle  The combination of goods and services provided to a customer  Service package  The physical resources needed to perform the service Differences Between Product and Service Design Tangible – intangible Services created and delivered at the same time Services cannot be inventoried Services highly visible to customers Services have low barrier to entry Location important to service . processes. 3 to 10 times  creates a database for manufacturing information on product specifications  provides possibility of engineering and cost analysis on proposed designs  Service is an act  Service delivery system  Facilities  Processes  Skills  Many services are bundled with products  Service design involves  The physical resources needed  The goods that are purchased or consumed by the customer  Explicit services  Implicit services  Service  Something that is done to or for a customer  Service delivery system  The facilities.  increases productivity of designers.  Computer-Aided Design (CAD) is product design using computer graphics.

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