war — What comes to mind when you hear “operations management”?= : a INTRODUCTION TO OPERATIONS MANAGEMENT IV Aree eaeSS LEARNING OBJECTIVES Cervical ret ¢comlt0 (0181 7 ol 10) (Ce) 1. Define the terms operations management and supply chain 2. Identify the three major functional areas of organizations and describe how they interrelated 3. Identify similarities and differences between production and service fo) ole eats 4. Explain the key aspects of operations management decision making 5. Explain the need to manage the supply chain IER eer te Lene aad 2Saco ie Ame ONTO eR WC Mat eL eg CO (ere ts Aer ew PM Ledge [Te Cel) Image Credit: bizbeatblog. dallasnews.com Cp nan 7 AeBASIC FUNCTIONS OF THE BUSINESS ORGANIZATION IER eer te Lene aad itTHE TRANSFORMATION PROCESS Nee RCC kt eke tt rr fl f UE gett to ACEC sns Deena Pe cto a Ei} Peas 7 T eee H Ly aoe Cee een Ce Ure oT Re eR end a * Gontrol = The comparison of feedbagk against previously established standards to Cen ieelta NRG (olarak IER eer te Lene aadSS PROCESS VARIATION mee eC + Variety of goods or services being offered + The greater the variety of goods and services offered, the greater the variation in Pee een Meese Siac AUR ule + These are generally predictable (seasonal variation or seasonality, e.g., swimwear, warm clothes, Christmas, tourist seasons, school supplies). Sen aus ome oe eu) + Random variation Se RU Ona ecm cree eMC ee Ue Cone acne a ae saa + Assignable variation + Variation that has identifiable sources. (e.g., defective inputs, incorrect work methods, retrain on) * This type of variation can be reduced, or eliminated, by analysis and corrective action. IER eer te Lene aad 20ABC News: Inside Amazon: Secrets of an Online Mega-Gianta ; SUPPLY & DEMAND Operations & Sales & Supply Chains Marketing YN — Prompt questions: + Q2: Why is it difficult to match supply and demand? + Q3: What actions could a manager take to better match supply and demand? oe (CNNAC360, 2:14 to 3:00) IER eer te Lene aadDISCUSSIONS * Prompt questions: + Q1: What are the implications of these differences between goods and services to operations managers? * Q2: Why is it difficult to match supply and demand? + Q3: What actions can a manager take to better match supply and demand? + Directions: + Form groups of two with a peer from a different department + Discuss the three prompt questions (15 minutes) * In the discussion, try to bring in domain expertise from you major + Briefly summarize your answer to each question on paper— BUSINESS FUNCTIONS ARE INTERCONNECTED IER eer te Lene aadSS — SUPPLY CHAIN ISSUES 2. The need to manage inventories Cale alam ie lnm) + Vendor Managed Inventory (VMI) + Logistics IER eer te Lene aad enSS —_ __,,~ SUPPLY CHAIN ISSUES 5. Increasing importance of e-business + E-business: The use of internet to network and empower business processes, electronic commerce, organizational communication and collaboration with in a company and with its customers, suppliers, and other stakeholders. (Combe, 2006) Business Government C2B Consumer 2 B2C Consumer Business Government ER eee teens Eaa SS — GOOD OR SERVICE? * Goods: physical items that include raw materials, parts, FW ler- fst Tan ell (cso Lae Ml ar- |e lcole (Ueto * Services: activities that provide some combination of time, location, form or psychological value. fe Telefe Tet N eM OeUAL UAL LL IER eer te Lene aad 13CL lage Credit: pgbeautyscience.comGEE'S Image Credit: WikipediaSS SUPPLY CHAIN ISSUES 4. Increasing levels of outsourcing + Law of Comparative Advantage * Benefits of Outsourcing + Allow a company to focus on strategic, core competencies * Cost savings or cost avoidance + Flexibility for using services as needed + Changes fixed costs into variable costs * Types of Business Activities Outsourced + Information Technology (IT) + Human Resources (HR) * Learning Function (Corporate Training) * Customer Service (Call centers) * Finance and Accounting IER eer te Lene aad rs— OM AND SUPPLY CHAIN CAREER OPPORTUNITIES * Operations manager * Supply chain manager + Production analyst + Schedule coordinator * Production manager + Industrial engineer + Purchasing manager * Inventory manager * Quality manager IER eer te Lene aad EO6. Competitive pressures 7. Increasing globalization 8. The complexity of supply feiare lat) aries eee mua Relationship International Conference on Computers & Industrial Engineering, pp792-797 Serdarasan, Seyda. "A review of supply chain complexity drivers." IER eer te Lene aadKEY DIFFERENCES Customer contact Uniformity of input Labor content of jobs Uniformity of output Production and delivery (Output) Measurement of productivity Quality assurance (Opportunity to correct problems) Amount of inventory Evaluation of work Ability to patent design Low High Low High Tangible Easy High Much Easier Usually High Low High Low Intangible Difficult Low Little Difficult Not usualSS OPERATIONS MANAGEMENT * What is operations? + The part of a business organization that is responsible for producing goods or services + What is operations management? + The management of systems or processes that create goods and/or provide services * Operations management affects: * Companies’ ability to compete IER eer te Lene aad D— 7 KEY POINTS « Although there are some basic differences between services and products that must be taken into account from a managerial standpoint, there are also many similarities between the two. + Environmental issues will increasingly impact operations decision making. + Ethical behavior is an integral part of good management practice. + All business organizations have, and are part of, a supply chain that must be managed. IER eer te Lene aad PT— ; KEY POINTS * The operations function is that part of every business organization that produces products and/or delivers services. * Operations consists of processes that convert inputs into outputs. Failure to manage those processes effectively will have a negative impact on the organization. + Akey goal of business organizations is to achieve an economic matching of supply and demand. The operations function is responsible for providing the supply or service capacity for expected demand. + All processes exhibit variation that must be managed. IER eer te Lene aad 40Customer contact Uniformity of input U Prompt questions: ) ° Q1: We have seen the differences between production of i goods and delivery of services. What are the implications of these differences to operations managers? Amount of inventory Much Little Evaluation of work Easier Difficult Ability to patent design Usually Not usual IER eer te Lene aadSUPPLY & DEMAND Operations & Sales & Supply Chains Marketing IER eer te Lene aad Wasteful Costly loser Ong ee) er outs Pluie aoa) el}SS PROCESS MANAGEMENT CMe ile-\-mer-l (tele) a (elm 10 ge ae + Upper-management processes + These govern the operation of the entire organization. + Operational processes + These are core processes that make up the value stream. + Supporting processes + These support the core processes. * Managing a Process to Meet Demand + Ideally, the capacity of a process will be such that its output just matches demand. IER eer te Lene aad irSS ‘SYSTEM DESIGN DECISIONS * System Design + Capacity * Facility location + Facility layout + Product and service planning * These are typically strategic decisions that * usually require long-term commitment of resources * determine parameters of system operation IER eer te Lene aad Pyrr ~ ROLE OF THE OPERATIONS MANAGER * Recap: + Operations: The part of a business organization that is responsible for producing goods or services * Operations management: The management of systems or processes that create goods and/or provide services * Aprimary function of the operations manager is to guide the system by decision making. Sirs) 7) e gm Been} + System Operation Decisions IER eer te Lene aad EySS DECISION MAKING © Most operations decisions involve many alternatives that can have quite different impacts on costs or profits © Typical operations decisions include: Caen alae ice eM 10] ema UAL Lol ee ¢ When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? Ce OL One Se ALoran LATOR RS OR LCR el Se e How: How will the product or service be designed? How will the work be done? How will resources be allocated? IER eer te Lene aad nyrr QUANTITATIVE METHODS + Adecision making approach that frequently seeks to obtain a mathematically optimal solution * Linear programming * Queuing techniques + Forecasting techniques + Inventory models * Project models + Statistical models * Modeling is a key tool used by all decision makers + Model: an abstraction of reality; a simplification Sere UKM Ome ocs * They are simplifications of real-life phenomena Pa NSA OA tase NMC RSC US Om attention can be focused on the most important aspects of the real- life system IER eer te Lene aad 25SS SYSTEM OPERATION DECISIONS * System Operation + These are generally tactical and operational decisions + Management of personnel + Inventory management and control * Scheduling + Project management * Quality assurance + Operations managers spend more time on system operation decision than any other decision area + They still have a vital stake in system design IER eer te Lene aad: — KEY ISSUES FOR TODAY’S BUSINESS OPERATIONS + Economic conditions + Management of technology + The Internet, e-commerce, e-business + Competing in a global economy + Globalization, outsourcing * Supply chain management (more in the following slides) + Environmental concerns and sustainability * Global warming, carbon footprint + Ethical conduct + Worker safety, product safety, the community, hiring/firing workers, ... * CNN 4/23/14: A fatal wait: Veterans languish and die on a VA hospital's Seicim ls Cie MCU emer a) Le Ue Ok Ne when in reality it had been six, nine, in some cases 21 months” IER eer te Lene aad a* Benefits A Models are generally easier to use and less expensive than dealing with the real system Require users to organize and sometimes quantify information Increase understanding of the problem Enable managers to analyze “What if?” questions IER eer te Lene aad SS BENEFITS / LIMITATIONS OF MODELS + Limitations 1 Quantitative information may be emphasized at the expense of qualitative information Models may be incorrectly applied and the results misinterpreted Ce MeO aL widespread availability of sophisticated, computerized models are placed in the hands of Irae olaual Te Me Se The use of models does not guarantee good decisions. 26WORKER SAFETY + WSJ 4/21/14 http://online.wsj.com/news/articles/SB10001424052702303873604579493502231397942 + Inside Nike's Struggle to Balance Cost and Worker Safety in Bangladesh Nike, which first used a factory in Bangladesh in 1991, had kept its footprint there small, never working with more than 10 factories. The rest of the industry moved more aggressively into Bangladesh. + The decision came not long before another garment-manutacturing hub known as Rana Plaza collapsed, killing 1,100 people in a suburb of Dhaka, in the worst industrial disaster in Bangladesh's history. The tragedy, which happened a year ago this month, has forced Western apparel sellers to re-examine their world-wide search for cheap labor, which has turned Bangladesh into an exporter of $20 billion of clothing a year. Dhaka ° cnetagsng il OCHArr — 7 THE NEED FOR SUPPLY CHAIN MANAGEMENT * In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems: * Oscillating inventory levels * Inventory stockouts Oi Umer * Quality problems IER eer te Lene aad el[a lo a — — SUPPLY CHAIN ISSUES The need to improve operations The need to manage inventories Increasing transportation costs Increasing levels of outsourcing Increasing importance of e-business THOMAS L. FRIED (Oey elm keels THE WORN Increasing globalization The complexity of supply chains NS FLAN RY OF THE TWENTY-FIR IER eer te Lene aad erySUPPLY CHAIN * Supply Chain + Asequence of activities and organizations involved in producing and delivering a good or service Suppliers’ Direct eet ial iain) suppliers ~ suppliers ~ Piesleet | IGE POS luli) IER Acre en ead cyUS CARBON FOOTPRINT + The United States has been one of the few bright spots for climate-change policy in recent years. patos anks to the recession, improved efficiency Sobsiiienl measures and the shale-gas boom, the nation's carbon-dioxide emissions from energy fell 12 percent between 2005 and 2012. Strategies + Energy Efficiency + Energy Conservation + Fuel Switching 6% Residential & I Commercial beset + Carbon Capture and Sequestration Energy rit carbon donde omlons sere tiory | ions : som Seed ae ro som som 20 Note Altemission estates trom ne iavensory ors a0 Greenhouse Ces Emistons and Ss 1990-2012 5 ‘Source: US Environmental Protection Agency gy BE BS wy me am wo wn a2 aw mM as a ces itl pe erieen Source: The Washington Post 1/19/14SS — SUPPLY CHAIN ISSUES 1. The need to improve operations PeesIUUlar-lel/l10g + Productivity (more in chapter 2) + Efficiency (more in chapter 5) + Quality (more in chapters 9 & 10) IER eer te Lene aad Er)SUPPLY CHAIN ISSUES 3. Increasing transportation costs 132 Month Average Retail Price Chart Regular Gas Regular Gas Price (US SiG) Price (US SIG) uss 2008" 2005 2008~=—=2007” 200820092010 Date (MonthiDay)