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Introduction to Operations Management

Operations Management

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Introduction to Operations Management

CHAPTER

Introduction to Operations Management

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Introduction to Operations Management

Operations Management

Figure 1.1

The management of systems or processes that create goods and/or provide services
Organization

Finance

Operations

Marketing

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Introduction to Operations Management

Value-Added

Figure 1.2

The difference between the cost of inputs and the value or price of outputs.
Value added
Inputs Land Labor Capital Transformation/ Conversion process
Feedback

Outputs Goods Services

Control
Feedback Feedback

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Introduction to Operations Management

Goods-service Continuum

Figure 1.3

Steel production Home remodeling Auto Repair Maid Service Teaching Automobile fabrication Retail sales Appliance repair Manual car wash Lawn mowing

High percentage goods Low percentage service

Low percentage goods High percentage service

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Introduction to Operations Management

Food Processor
Processing
Cleaning Making cans Cutting Cooking Packing Labeling

Table 1.2

Inputs
Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Outputs
Canned vegetables

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Introduction to Operations Management

Hospital Process
Processing
Examination Surgery Monitoring Medication Therapy

Table 1.2

Inputs
Doctors, nurses Hospital Medical Supplies Equipment Laboratories

Outputs
Healthy patients

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Introduction to Operations Management

Industry

Inputs

Outputs

Process

Resources

Automobile Institute

Raw Materials Students

Cars Educated and Responsible citizens Satisfied Customers

Fabrication , Assembly Knowledge and Skills

Workers , Parts , etc Teachers , Books Classrooms etc. Food , Chef , Waiter , Managers etc. Cars , trucks and Planes.

Restaurant

Hungry Customers

Meals , Service , Ambience , Layout etc. Transport

Carriers

Goods / Products

Things at another place and time

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Manufacturing or Service?

Tangible

Act

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Production of Goods vs. Delivery of Services


Production of goods tangible output Delivery of services an act Service job categories

Government Wholesale/retail Financial services Healthcare Personal services Business services Education

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Key Differences
1.
2. 3. 4. 5. 6. 7. 8.

Customer contact Uniformity of input Labor content of jobs Uniformity of output Measurement of productivity Production and delivery Quality assurance Amount of inventory

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Manufacturing vs Service
Manufacturing Service
Tangible Low
High

Characteristic
Output
Customer contact Uniformity of input Labor content Uniformity of output

Intangible
High Low High Low Difficult Low

Low
High Easy

Measurement of productivity Opportunity to correct quality problems


High

High

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Scope of Operations Management


Operations Management includes:

Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more . . .

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Objectives of POM

Primary Objectives : 1.Quality 2.Quantity 3.Cost / Price 4. Time

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Objectives

Secondary Objectives : 1.Men 2.Machines 3.Materials 4. Services 5. Techniques

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Types of Operations
Examples

Table 1.4

Operations
Goods Producing

Farming, mining, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites

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Responsibilities of Operations Management


Table 1.6

Planning
Capacity Location Products & services Make or buy Layout Projects Scheduling Inventory Quality Costs Productivity

Organizing
Degree of centralization Process selection

Staffing
Hiring/laying off Use of Overtime

Directing
Incentive plans Issuance of work orders Job assignments

Controlling/Improving

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Challenges faced by Operations Mgr

Manage multiple customers Understanding Service Concept Managing in Real Time. Continually Improving Operations Encouraging Innovation. Managing Short term and long term issues.

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Modern Trends in POM

Change of Focus from Seller to Buyer Globalization Japanese Contribution Business Process Reengineering Supply Chain Management Environmental Issues New Technology CAD / CAM / Robotics Just in Time Management Use of Computers and MIS Systems

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Key Decisions of Operations Managers


What
What resources/what amounts

When
Needed/scheduled/ordered

Where
Work to be done

How
Designed

Who
To do the work

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Business Operations Overlap

Figure 1.5

Operations

Marketing

Finance

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Operations Interfaces
Industrial Engineering Maintenance

Distribution

Purchasing

Operations

Public Relations

Legal

Personnel
Accounting MIS

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Historical Evolution of Operations Management


Table 1.7

Industrial revolution (1770s) Scientific management (1911)

Mass production Interchangeable parts Division of labor

Human relations movement (1920-60) Decision models (1915, 1960-70s) Influence of Japanese manufacturers

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Trends in Business

Major trends

The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Agility Just In Time Mgmt Total Quality Mgmt

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Simple Product Supply Chain

Figure 1.7 Suppliers Suppliers

Direct Suppliers

Producer

Distributor

Final Consumer

Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service

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A Supply Chain for Bread


Value Added
$0.15
$0.08 $0.15 $0.08

Stage of Production
Farmer produces and harvests wheat
Wheat transported to mill Mill produces flour Flour transported to baker

Value of Product
$0.15
$0.23 $0.38 $0.46

Baker produces bread


Bread transported to grocery store Grocery store displays and sells bread Total Value-Added

$0.54
$0.08 $0.21 $1.29

$1.00
$1.08 $1.29

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Other Important Trends

Ethical behavior Operations strategy Working with fewer resources Cost control and productivity Quality and process improvement Increased regulation and product liability Lean production

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