LESSON 1

OPERATIONS MANAGAMENT

 Production is the creation of goods and services.

 Operations management is the set of activities that creates value in the form of goods and services by
transforming inputs into outputs.

Organizing to Produce Goods and Services

Essential functions:
o Marketing – generates demand
o Operations – creates the product
o Finance/Accounting – tracks organizational performance, pay bills, collects money

Commercial Bank
 Operations
o Teller scheduling
o Check clearing
o Collection
o Transaction processing
o Facilities design/layout
o Vault operations
o Maintenance
o Security
 Finance
o Investments
o Securities
o Real estate
 Accounting
 Auditing
 Marketing
o Loans
 Commercial
 Industrial
 Financial
 Personal
 Mortgage
o Trust department

Airline
 Operations
o Ground support equipment
 o Maintenance
o Ground operations
 Facility maintenance
 Catering
o Flight operations
 Crew scheduling
 Flying
 Communications
 Dispatching
o Management science
 Finance/Accounting
o Accounting
 Accounts payable
 Accounts receivable
 General ledger
o Finance
 Cash control
 International exchange
 Marketing
o Traffic administration
 Reservations
 Schedules
 Tariffs (pricing)
o Sales
o Advertising

Manufacturing
 Operations
o Facilities
 Construction: maintenance
o Production and inventory control
 Scheduling: materials control
o Quality assurance and control
o Supply chain management
o Manufacturing
 Tooling: fabrication; assembly
o Design
 Product development and design
 Detailed product specifications
o Industrial engineering
 Efficient use of machines, space, and personnel
o Process analysis (also called bottleneck analysis)
  Development and installation of production tools and equipment
 Finance/Accounting
o Disbursements/credits
 Accounts receivable
 Accounts payable
 General ledger
o Funds management
 Money market
 International exchange
o Capital requirements
 Stock issues
 Bond issue and recall
 Marketing
o Sales promotion
o Advertising
o Sales
o Market research

Functions – manufacturer
Manufacturing
 Marketing
 Operations
o Manufacturing
o Production control
o Quality control
o Purchasing
 Finance/Accounting

Operations Managers do
Plan – Organize – Staff – Lead – Control

The Critical Decisions

Quality management
 Who is responsible for quality?
 How do we define quality?
Service and product design
 What product or service should we offer?
 How should we design these products and services?
Process and capacity design
 What processes will these products require and in what order?
 What equipment and technology is necessary for these processes?
Location
  Where should we put the facility?
 On what criteria should we base this location decision?
Layout design
 How should we arrange facility?
 How large a facility is required?
Human resources and job design
 How do we provide a reasonable work environment?
 How much can we expect our employees to produce?
Supply chain management (determine how are we going to bring the product to customers)
 Should we make or buy this item?
 Who are our good suppliers and how many should we have?
Inventory, material requirements planning
 How much inventory of each item should we have?
 When do we reorder?
Immediate, short term and product scheduling
 Is subcontracting production a good idea?
 Are we better off keeping people on the payroll during slowdowns?
Maintenance (corrective and preventive maintenance)
 Who is responsible for maintenance?
 When do we maintenance?

Where are the OM Jobs

 Technology/methods
  Facilities/space utilization
 Strategic issues
 Response time
 People/team development
 Customer service
 Quality
 Cost reduction
 Inventory reduction
 Productivity improvement

Significant Events in Operations Management

 Cost Focus

Early Concepts 1776-1880

 Labor Specialization (Smith, Babbage)
 Standardized Parts (Whitney)

Scientific Management Era 1880-1910

 Gantt Chart (Gantt)
 Motion & Time (Gilbreth)
 Process Analysis (Taylor)
 Queuing Theory (Erlang)

Mass Production Era 1910-1980

 Moving Assembly Line (Ford/Sorensen)
 Statistical Sampling (Shewhart)
 Economic Order Quantity (Harris)
 Linear Programming (Dantzig)
 PERT/CPM (Dupont)
 Material Requirements Planning

 Quality Focus

Lean Production Era 1980-1995

 Just in Time
 Computer Aided Design
 Electronic Data Interchange
 Total Quality Management
 Baldridge Award
 Empowerment
 Kanbars
 Customization Focus

Mass Customization Era 1995-2005

 Globalization
 Internet
 Enterprise Resource Planning
 Learning Organization
 International Quality Standards
 Finite Scheduling Supply Chain Management
 Agile Manufacturing

LESSON 2
THE HERITAGE OF OPERATIONS MANAGEMENT
 Division of labor (Adam Smith 1776 and Charles Babbage 1852)
 Standardized parts (Whitney 1800)
 Scientific Management (Taylor 1881)
 Coordinated assembly line (Ford/Sorenson/Avery 1913)
 Gantt charts (Gantt 1916)
 Motion study (Frank and Lillian Gilbreth 1922)
 Quality control (Shewhart 1924; Deming 1950)
 Computer (Atanasoff 1938)
 CPM/PERT (DuPont 1957)
 Material requirements planning (Orlicky 1960)
 Computer aided design (CAD 1970)
 Flexible manufacturing system (FMS 1975)
 Baldrige Quality Awards (1980)
 Computer integrated manufacturing (1990)
 Globalization(1992)
 Internet (1995)

Changing Challenges for the Operations Manager