INTRODUCTION TO OPERATIONS

MANAGEMENT
 OUTLINES

▶ What Is Operations Management?

▶ Why OM?
▶ What Operations Managers Do
▶ Operations for Goods and Services
▶ The Productivity Challenge
▶ Current Challenges in Operations Management
▶ Ethics, Social Responsibility, and Sustainability
 WHAT IS OPERATIONS MANAGEMENT?

• Production is the creation of

goods and services
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• Operations management (OM) Using the system

is the set of activities that create

value in the form of goods and
services by transforming inputs
into outputs
 WHY OM?
1. OM is one of three major functions of any organization;
we want to study how people organize themselves for
productive enterprise

2. We want (and need) to know how goods and services

are produced
3. OM is such a costly part of an organization
 WHAT OPERATIONS MANAGERS DO?

• Basic Management Functions

▶Planning
▶Organizing
▶Staffing
▶Leading
▶Controlling
 10 CRITICAL DECISIONS IN OM
• Quality management
• Who is responsible for quality?
• How do we define quality?
• How are quality goods and services achieved and improved?
• Are processes performing adequately?
• What standards should be used?
• Are standards being met?

• Service and product design

• What product or service should we offer?
• How should we design these products and services?
• How can products and services be improved?

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 10 CRITICAL DECISIONS IN OM

• Process and capacity design

• What processes will these products required and in what order?
• What equipment and technology are necessary for these processes?
• How much capacity will be needed?
• How can the organization best meet capacity requirements?
• Location
• Where should we put the facility
• On what criteria should we base this location decision?

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 10 CRITICAL DECISIONS IN OM

• Layout design
• How should we arrange the 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?
• What is the best way to motivate employees?

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 10 CRITICAL DECISIONS IN OM

• Supply chain management

• Should we make or buy this item?
• Who are our good suppliers and how many should we
have?
• How to achieve effective flows of information and goods
throughout the chain
• Inventory, material requirements planning,
• How much inventory of each item should we have?
• When do we re-order?
• Which item should get the most attention

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 10 CRITICAL DECISIONS IN OM

• Intermediate, short term, and project scheduling

• Is subcontracting production a good idea?
• Are we better off keeping people on the payroll during
slowdowns?
• How can jobs and resources best be scheduled?
• Maintenance
• Who is responsible for maintenance?
• When do we do maintenance?

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SIGNIFICANT EVENTS IN OM

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 SIGNIFICANT EVENTS IN OM

NOW?
What has changed after Covid-19?

- Supply chain disruptions is a big issue

- Resilience supply chains (flexibility, redundancy, visibility)

- Global labour shortage

- Lack of stability in work schedule
- Mental health, burnout and anxiety

- Technology to support automation, work-from-home

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 NEW CHALLENGES IN OM

• Local or national • Global focus

focus • Just-in-time
• Batch shipments • Supply chain partnering
• Low bid purchasing • Rapid product
• Lengthy product development, alliances
development
• Mass customization
• Standard products
• Empowered employees,
• Job specialization
teams
• Low costs
• Sustainability

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 NEW CHALLENGES IN OM
Emerging
Issues,
Globalisation
Challenges

Sustainability

Technology
NEW CHALLENGES IN OM

Growth of World Trade

Growth of World TradeGlobalisation

NEW CHALLENGES IN OM
Globalisation

Cheaper products
Supply chain Competition Force to innovate

Growth of World Trade

Cultures
Risks Impact
/values

Product and process

Health and safety
design
workplace layout New
Human resource
Product design regulations
Supply Chain
Global Supply Chains in a Post-Pandemic World
• The supply shock and demand shock that followed as the global
economy shut down.

• greater political and competitive pressures to increase their

domestic production, grow employment in their home countries,
reduce or even eliminate their dependence on sources that are
perceived as risky.
Growth of World Trade
• rethink their use of lean manufacturing strategies that involve
minimizing the amount of inventory held in their global supply
chains.
Global Supply Chains in a Post-Pandemic World
understand their vulnerabilities and then consider several steps

Uncover and Address the Hidden Risks

Diversify your supply base

Growth of World Trade
Hold intermediate inventory or safety stock

Take Advantage of Process Innovations

Revisit the Trade-Off Between Product Variety and Capacity

Flexibility
 NEW CHALLENGES IN OM
Sustainability
Environment
Growth of World Trade

Social

Economy
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 NEW CHALLENGES IN OM

Eco-product design Green purchasing

Circular economy Closed-loop supply chain

Green building layout Smart growth

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 NEW CHALLENGES IN OM
• businesses create supply chains that recover or recycle the resources used to create their products.
Shrinking their environmental footprint, trimming operational waste, and using expensive
resources more efficiently

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NEW CHALLENGES IN OM

Growth of World Trade

 NEW CHALLENGES IN OM
• centralized data storage and processing for operations

Cloud
and supply chain
• Co-creation for product design and development

computing • collection of data from

traditional and digital sources
• ability to learn from a massive inside and outside company.
amount of given historical data • Interpretation of data to gain
Artificial Big
(experience) and find a pattern on insights

IR
their own, then make decisions and
Growth of World Trade • Using the data feeds from
Intelligence data
find solutions accordingly existing products and services
• instantaneous judgement on whether to inform the design of new
or not products to be shipped match

4.0
product or service propositions
the products on the shipment
schedule list.
• allows connecting things, sensors, actuators,
and other smart technologies .
• Through a rapid access to data and
Additive
construction of a three-dimensional object from a information about objects, IoT enables highly

IoT
CAD model or a digital 3D model. It can be done innovative and efficient services
Manufacturing
in a variety of processes in which material is
deposited, joined or solidified under computer
• route optimization and asset tracking. In this
way, a ship’s position can be tracked and
control, with material being added together, location information can be sent to other
typically layer by layer ships on the same network, avoiding
collisions
 THE CHALLENGE OF SOCIAL RESPONSIBILITY
A young girl left severely brain-damaged
from salmonella poisoning after eating a
KFC chicken twister.

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THE CHALLENGE OF SOCIAL RESPONSIBILITY

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THE CHALLENGE OF SOCIAL RESPONSIBILITY

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 THE CHALLENGE OF SOCIAL RESPONSIBILITY

• Efficiently developing & producing safe, quality

products
• Maintaining sustainable environment
• Providing a safe workplace
• Honoring stakeholder commitments

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 GOODS VERSUS SERVICES

Goods Service
• Can be resold
♦ Reselling unusual
• Can be inventoried ♦ Difficult to inventory
• Some aspects of ♦ Quality difficult to
quality measurable measure
• Selling is distinct ♦ Selling is part of
from production service

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 GOODS VERSUS SERVICES
Goods
• Product is transportable
• Site of facility important for
cost
• Often easy to automate
• Revenue generated primarily
from tangible product
Service
♦ Provider, not product is
transportable
♦ Site of facility important for
customer contact
♦ Often difficult to automate
♦ Revenue generated primarily
from intangible service.
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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 75 50 25 0 25 50 75 100
Percent of Product that is a Good Percent of Product that is a Service

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PRODUCTIVITY

Ratio of outputs divided by the

inputs

Measure of output and not

efficiency

Multifactor and single

 PRODUCTIVITY
Units produced
Productivity = Input used Labour Productivity

Units produced
Productivity =
Labor-hours used

1,000
= = 4 units/labor-hour
250
 PRODUCTIVITY

Productivity Output
Calculation
Labor + Material + Energy
+ Capital + Miscellaneous

► Also known as total factor productivity

► Inputs are often expressed in dollars
 PRODUCTIVITY

1) A foundry produces circular utility access hatches (manhole

covers). If 120 covers are produced in a 10-hour shift, the productivity
of the line is
A) 1.2 covers/hr
B) 2 covers/hr
C) 12 covers/hr
D) 1200 covers/hr
E) none of the above
 PRODUCTIVITY

2) Gibson Valves produces cast bronze valves on an assembly line. If

1600 valves are produced in an 8-hour shift, the productivity of the
line is
A) 2 valves/hr
B) 40 valves/hr
C) 80 valves/hr
D) 200 valves/hr
E) 1600 valves/hr
 PRODUCTIVITY

3) The Dulac Box plant produces 500 cypress packing boxes in two
10-hour shifts. What is the productivity of the plant?
A) 25 boxes/hr
B) 50 boxes/hr
C) 5000 boxes/hr
D) none of the above
E) not enough data to determine productivity
 PRODUCTIVITY
• A firm cleans chemical tank cars in the Bay St. Louis area. With
standard equipment, the firm typically cleaned 70 chemical tank
cars per month. They utilized 10 gallons of solvent, and two
employees worked 20 days per month, 8 hours a day. The
company decided to switch to a larger cleaning machine. Last
April, they cleaned 60 tank cars in only 15 days. They utilized 12
gallons of solvent, and the two employees worked 6 hours a day.

1. What were their raw material and their labor productivity

with the standard equipment?
2. What are their raw material and their labor productivity
with the larger machine?

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