Reasons for Studying Operations Management 1. Operation Management is one of the three major functions of any organization 2.

We want to know how goods and services are produced. 3. We want to understand what operations managers do. 4. Operation Management is a costly part of an organization. Production- is the creation of goods and services. Operations- Part of the business organization that is responsible for producing goods and services. Goods- Physical items produced by business organization William Stevenson Services- Activities that provide some combination of time, location, form and psychological value-WS Management- The process of working with people and resources to accomplish organizational goals. Thomas Bateman And Scott Snell Efficiency- means doing something at the lowest possible cost Effectiveness- means doing the right things to create the most value for the company. Operations Management- focuses on carefully managing the processes to produce and distribute products and services. Carter Mcnamara Operations Management- Defined as the design, operation and improvement of the systems that create and deliver the firms primary products and services. Richard Chase The Three Basic Functions of Business Organizations Organizatio n Finance Operations Marketing

*All business organization have these three basic functions whether the business is retail store, hospital, car wash. Marketing- Creates demand and Gets customers

Finance- Tracks organizational performance, pay bills, collects money (obtain funds tracks money) Operations- Creates products

Evolution of Operations Management http://highered.mcgrawhill.com/sites/0073041912/student_view0/ebook/chapter1/chbody1/the_historical_ev olution_of_operations_management.html INDUSTRIAL REVOLUTION It began in 1770s in England goods were produced using Crafts Production System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods according to customer specifications. Problems and Issues: 1. Production was slow and costly. 2. The production costs did not decrease as volume increased (there were no economies of scale) 3. Many small companies emerged, each with its own set of standards. SCIENTIFIC MANAGEMENT The Scientific Management Era was spearheaded by Frederick W. Taylor Father of Scientific Management Science of Management-is based on observation, measurement, analysis and improvement of work methods and economic incentives. In the year 1911 Classic Book was published The Principles of Scientific Management Problems and Issues: 1. The Methods emphasized maximizing output. 2. Not popular with workers because Increase in output with no corresponding increase in compensation. 3. Many Companies abuse workers in their quest for efficiency. Other Pioneers contributed to this Movement 1. Frank Gilbreth- An Industrial Engineer Father of Motion Study a principles of motion economy that could be applied to incredibly small portions of a task. Observed to detect and eliminate redundant or wasteful motion. Applied

efficiency methods to their home and 12 children. (movie: cheaper by the dozen) 2. Henry Gantt- Recognized the value of non monetary rewards to motivate workers. He also developed a system for scheduling called Gantt Charts. 3. Harrington Emerson- Applied Taylors idea to Organization structure and encouraged the use of experts to improve organizational efficiency. He testified in congressional hearing that railroads could save a million dollars a day by applying Principles of Scientific Management. 4. Henry Ford- The great industrialist use Scientific Management techniques in his factories. He also introduced the moving assembly line which had a tremendous impact on production methods in many industries. Assembly Line is one of the several approaches to the production of goods and delivering services. The importance of Assembly Line to business and society is hard to overstate. He introduced Mass Production- a system of production in which large volumes of standardized goods are produced by low-skilled or semi-skilled workers using highly specialized and often costly equipment. Key concept that launched mass production was Interchangeable PartsParts of a product made to such precision that they do not have to be custom fitted. It is attributed to Eli Whitney, An American inventor who applied the concept to assembling muskets in the late 1700s. (1798 Eli received a contract from the government to make 10,000 muskets) The basis for Interchangeable parts was to standardized parts so that any part in a batch of parts would fit any automobile coming down the assembly line. ADVANTAGE OF INTERCHANGEABLE PARTS Parts did not have to be custom fitted, as they were in craft production. Standardized parts could also be used for replacement parts. Decrease in assembly time and cost. The other concept used by Ford was the Division of Labor- the breaking up of a production process into small tasks. Unlike craft production were each workers was responsible for doing many tasks, and thus required skill, with division of labor the tasks were so narrow that virtually no skill was required. Frederick Taylor and Henry Ford were despised by many workers, because they held workers in such low regard, expecting them to perform like robots. This paved the way for the human relations movement.

HUMAN RELATIONS MOVEMENT Scientific Management Movement emphasized the technical aspects of work design. Human Relations Movement emphasized the importance of the human element in Job Design. People contributed to this Movement 1. Elton Mayo (1930)- conducted studies at Hawthorne Works Plant of Western Electric. His studies revealed addition to the technical and physical aspect of work, workers motivation is critical for improving productivity. Hawthorne Effect- a term referring to the tendency of some people to work harder and perform better when they are participants in an experiment. (Researchers found that productivity increased due to attention from the research team and not because of changes to the experimental variable.) In 2009 researchers at the University of Chicago reanalyzed the original data and found that other factors also played a role in productivity and that the effect originally described was weak at best. 2. Abraham Maslow( 1940)- developed motivational theories hierarchy of needs He laid out five broader layers; the physiological needs, needs for safety and security, the needs for love and belonging, the needs for esteem, the need to actualize the self. 3. Frederick Herzberg (1950)- Herzberg theory describing two factors affecting peoples work motivation and satisfaction. Two (2) Factor Theory 1. Hygiene Factors-Characteristics of the workplace such as company policies, working conditions, pay and supervision that can make people dissatisfied. (extrinsic rewards) 2. Motivators Factors that make a job more motivating, such as additional job responsibilities, opportunities for personal growth and recognition and feeling of achievement. (intrinsic rewards) 4. Douglas McGregor (1960)- Theory X and Y, these theories represented the two ends of the spectrum of how employees view work.

Theory X- Negative end, assumed that workers do not like to work and have to be controlled- reward and punished- to get them to do good work. This attitude was quite common in other company. Resulted in adversarial environment (Adversary means a person, group or force that oppose or attacks; opponent or enemy). Theory Y- Positive end, assumed that workers enjoy the physical and mental aspects of work and become committed to work. (Resulted in empowered workers & a more cooperative spirit) 5. William Ouchi (1970) - added Theory Z which combined the Japanese approach (with such features as lifetime employment, employee problem solving and consensus building,) and the traditional western approach (that features short term employment, specialist and individual making and responsibility.)

DECISION MODEL AND MANAGEMENT SCIENCE The factory movement was accompanied by the development of several quantitative techniques. People contributed to this Movement Ford Whitman. Harris (1915) developed one of the first models: a mathematical model for inventory management. Dr. Harold F. Dodge, Harry G. Romig, and Walter Shewhar (1930) - three co-workers at Bell Telephone Labs, developed statistical procedures for sampling and quality control. Leonard Henry Caleb Tippett (1935) - conducted studies that provided the groundwork for statistical-sampling theory. At first, these quantitative models were not widely used in industry. However, the onset of World War II changed that. The war generated tremendous pressures on manufacturing output, and specialists from many disciplines combined efforts to achieve advancements in the military and in manufacturing. After the war, efforts to develop and refine quantitative tools for decision making continued, resulting in decision models for forecasting, inventory management, project management, and other areas of operations management. 1960s and 1970s - management science techniques were highly regarded. 1980s - They lost some favor. However, the widespread use of personal computers and user-friendly software in the workplace contributed to resurgence in the popularity of these techniques.

The Influence of Japanese Manufacturers A number of Japanese manufacturers developed or refined management practices that increased the productivity of their operations and the quality of their products. This made them very competitive, sparking interest in their approaches by companies outside Japan. Their approaches emphasized 1. Quality and continual improvement 2. Worker teams and empowerment 3. Achieving customer satisfaction. The Japanese can be credited with spawning the quality revolution that occurred in industrialized countries, and with generating widespread interest in time-based management (just-in-time production). The influence of the Japanese on U.S. manufacturing and service companies has been enormous and promises to continue for the foreseeable future. Because of that influence, this book will provide considerable information about Japanese methods and successes. PRODUCTION OF GOODS Results in a tangible output, anything that we can see or touch such as an automobile, eyeglasses and refrigerator. (goods oriented) It may take place in factory but can occur elsewhere. EX. Farm products DELIVERY OF SERVICES It implies an act. EX. A physicians examination, auto repair and Hair cut. (Act oriented) Service involves a much higher degree of customer contact PRODUCTION OF GOODS VS DELIVERY OF SERVICES 1. Degree of customer contact- Service involves a much higher degree of customer contact than manufacturing. 2. Uniformity of Input- Services operation is subject to greater variability of inputs than typical manufacturing operations. Manufacturing operations often have greater ability to control the amount of variability of inputs and achieve low variability in outputs. 3. Labor content of jobs- many services involve higher labor content than manufacturing operations. 4. Uniformity of output- Manufacturing tend to be smooth and efficient; services activities sometimes appear to be slow and awkward and output is more variable. 5. Measurement of productivity- more straightforward in manufacturing due to the high degree of uniformity of most manufactured items. In service operations variations in demand intensity and in requirements from job to job make productivity measurement considerably more difficult

6. Production and delivery- Customers receive the service as it is performed. 7. Quality assurance- more challenging in services when production and consumption occur at the same time. The higher variability of input creates additional opportunity for the quality of output to suffer unless quality assurance is actively managed. Quality is more evident for services than manufacturing, where errors can be corrected before the customer receives the output. 8. Amount of inventory- Manufacturing systems usually have more inventory on hand. 9. Evaluation of work- Goods are tangible and there is often a time interval between production and delivery, evaluation of output is less demanding than it is for services. 10.Ability to patent design- product designs is often easier to patent than service design and some service design cannot be patented, making it easier for competitors to copy them.

KEY TRENDS AND ISSUES IN BUSINESS List of Major Trends 1. Internet- offers great potentials for business organization but the potential as well as the risks must be clearly understood in order to determine if and how to exploit this potentials. E-commerce- Consumer business transactions such as buying online ot requesting information. E-businessuse of the internet to transact business (customers and suppliers). 2. Management Technology-high on the list of major trends and it promises to be high well into the future. Advances in methods, materials and equipment also have had an impact on competitions and productivity. Advances in information technology also have had a major impact on businesses. Technology advance also place a burden on management. Technology- the application of scientific discoveries to the development and improvement of goods and services. 3. Globalization and Management of supply chains- tightened border security in certain instances has slowed some movement of goods and people. In some cases organization are reassessing their use of offshore outsourcing. 4. Outsourcing- outsourcing of goods production increase not only transportation costs but also fuel consumption and carbon increase into atmosphere.

5. Agility- refers to the ability of an organization to respond quickly to demands or opportunities. Strategy that involves quickly responds to changes in volume demand or changes in product services offering. (To remain competitive and cope with increasingly shorter product life cycles and strive to achieve shorter development times for new or improved products and services.) 6. Ethical Behavior- is commanding increase attention from management at all levels. Accounting scandals, stock brokers realising misleading information.