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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

measurement. Applied . Production was slow and costly.Tracks organizational performance. The Methods emphasized maximizing output. analysis and improvement of work methods and economic incentives. SCIENTIFIC MANAGEMENT The Scientific Management Era was spearheaded by Frederick W. Many small companies emerged. Taylor “Father of Scientific Management” Science of Management-is based on observation. each with its own set of standards. pay bills. The production costs did not decrease as volume increased (there were no economies of scale) olution_of_operations_management.Creates products Evolution of Operations Management http://highered.Finance.html INDUSTRIAL REVOLUTION It began in 1770’s in England goods were produced using Crafts Production System in which highly skilled workers use simple. Problems and Issues: 1.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. Many Companies abuse workers in their quest for efficiency. flexible tools to produce small quantities of customized goods according to customer specifications.mcgrawhill. 2. collects money (obtain funds tracks money) Operations. Not popular with workers because Increase in output with no corresponding increase in compensation. 2. Other Pioneers contributed to this Movement 1. 3. In the year 1911 Classic Book was published “The Principles of Scientific Management” Problems and Issues: 1. Frank Gilbreth.

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

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

group or force that oppose or attacks. these quantitative models were not widely used in industry.added Theory Z which combined the Japanese approach (with such features as lifetime science techniques were highly regarded. (Resulted in empowered workers & a more cooperative spirit) 5. and specialists from many disciplines combined efforts to achieve advancements in the military and in manufacturing. People contributed to this Movement Ford Whitman.reward and punished.Theory X. employee problem solving and consensus building. assumed that workers do not like to work and have to be controlled. efforts to develop and refine quantitative tools for decision making continued. Theory Y. specialist and individual making and responsibility. Leonard Henry Caleb Tippett (1935) . Harold F. inventory management. 1980s . Resulted in adversarial environment (Adversary means a person. resulting in decision models for forecasting. William Ouchi (1970) .Positive end. and Walter Shewhar (1930) . After the war. This attitude was quite common in other company.Negative end. Dodge. At first. get them to do good work. opponent or enemy). assumed that workers enjoy the physical and mental aspects of work and become committed to work. However. and other areas of operations management. project management. the onset of World War II changed that. . developed statistical procedures for sampling and quality control.three co-workers at Bell Telephone Labs. 1960s and 1970s . Harry G.) DECISION MODEL AND MANAGEMENT SCIENCE The factory movement was accompanied by the development of several quantitative techniques. the widespread use of personal computers and user-friendly software in the workplace contributed to resurgence in the popularity of these techniques. Romig.) and the traditional western approach (that features short term employment.conducted studies that provided the groundwork for statistical-sampling theory. The war generated tremendous pressures on manufacturing output.They lost some favor. Harris – (1915) developed one of the first models: a mathematical model for inventory management. Dr.

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

Manufacturing systems usually have more inventory on hand. Technology advance also place a burden on management. evaluation of output is less demanding than it is for services. materials and equipment also have had an impact on competitions and productivity. 10. Outsourcing. Evaluation of work.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. 2.product designs is often easier to patent than service design and some service design cannot be patented. 4. making it easier for competitors to copy them.6. The higher variability of input creates additional opportunity for the quality of output to suffer unless quality assurance is actively managed. Advances in information technology also have had a major impact on businesses. Advances in methods. E-businessuse of the internet to transact business (customers and suppliers).Customers receive the service as it is performed. Quality is more evident for services than manufacturing. Technology. Management Technology-high on the list of major trends and it promises to be high well into the future. Globalization and Management of supply chains. Internet.Consumer business transactions such as buying online ot requesting information.outsourcing of goods production increase not only transportation costs but also fuel consumption and carbon increase into atmosphere. 8. In some cases organization are reassessing their use of offshore outsourcing.tightened border security in certain instances has slowed some movement of goods and people.the application of scientific discoveries to the development and improvement of goods and services.Goods are tangible and there is often a time interval between production and delivery. . 9. 3. Quality assurance.Ability to patent design. 7. E-commerce.more challenging in services when production and consumption occur at the same time. KEY TRENDS AND ISSUES IN BUSINESS List of Major Trends 1. where errors can be corrected before the customer receives the output. Production and delivery. Amount of inventory.

is commanding increase attention from management at all levels. stock brokers realising misleading information. (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. Strategy that involves quickly responds to changes in volume demand or changes in product services offering.refers to the ability of an organization to respond quickly to demands or opportunities.) 6. Agility.5. . Ethical Behavior. Accounting scandals.