INTRODUCTION TO OPERATIONS MANAGEMENT

Ferdous Sarwar, PhD

Lecture 1 2 3 4 5 6 7 8 9 10 11 12
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Topic Production Operations System Forecasting (Quantitative & Qualitative) Capacity Planning Location and Facility Layout Planning Work Design and Measurement Management of Quality Midterm Operations Scheduling (PERT/CPM) Inventory Control Materials Requirement Planning Just-in-time & Lean Management Supply Chain Management Scheduling Final

Quiz

Q1
Q2

Q3

Q4

WHAT IS OPERATIONS MANAGEMENT?

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Operations Management is an area of management concerned with overseeing, designing, and controlling the process of production and redesigning business operations in the production of goods and/or services. Operations Management is the set of activities that creates goods and services by transforming inputs into outputs

Focuses on carefully managing the processes to produce and distribute products and services.
Outputs (goods and services)

Inputs (customers and/or materials)

Transformation Process (components)

WHY STUDY OM?

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Systematic Approach to Org. Processes

Business Education/ Career Opportunities

Operations Management

Increase Competitive Advantage/Survival

Cross-Functional Applications

WHY STUDY OM?

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OM is one of three major functions (marketing, finance, and operations) of an organization OM often includes substantial measurement and analysis of internal processes, because a great deal of focus is on efficiency and effectiveness of processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization.

Historical Development of OM
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Prior to 1900
Cottage

industry produced custom-made goods. Watts steam engine in 1785. Whitneys standardized gun parts in 1801. Industrial Revolution began at mid-century.

Historical Development of OM (cont.)

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Scientific Management (Frederick W. Taylor)

Systematic

approach to increasing worker productivity through time study, standardization of work, and incentives. Viewed workers as an interchangeable asset.

Other Management Pioneers

Frank

and Lillian Gilbreth

industrial psychology

Motion study and

Henry

L. Gantt
the Gantt chart

Scheduling and

Historical Development of OM (cont.)

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Moving Assembly Line (1913)

Labor

specialization reduced assembly time.

Hawthorne Studies
Yielded

unexpected results in the productivity of Western Electric plant workers after changes in their production environment. Led to recognition of the importance of work design and employee motivation.

Historical Development of OM (cont.)

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Operations Research (Management Science)

Outgrowth

of WWII needs for logistics control and weapons-systems design. Seeks to obtain mathematically optimal (quantitative) solutions to complex problems.

OM Emerges as a Field
19501960, OM

moved beyond industrial engineering and operations research to the view of the production operation as a system.

Historical Development of OM (cont.)

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OM Emerges as a Field
19501960, OM

moved beyond industrial engineering and operations research to the view of the production operation as a system.
solutions approaches

The Marriage of OM and IT

Integrated
Business process reengineering Supply chain management Systems integration (SAP)

Historical Development of OM (cont.)

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Operations Management in Services

OM

concepts can apply to both manufacturing and service operations. world class operations requires compatible manufacturing and service operations.

Integration of Manufacturing and Services

Conducting

Managerial Issues
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Shift in balance of power to consumers

Globalization
E-commerce

of business and markets

Achieving higher levels of productivity

Creating

higher quality products Delivering better customer service Achieving shorter delivery times Reducing labor and material costs

Top-down Approach to OM Strategy

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Operations Strategy Decisions

Strategic

(long-range)

Needs of customers

(capacity planning)

Tactical

(medium-range)

Efficient scheduling of

resources

Operational

planning and control (short-range)

Immediate tasks and

activities

An Operational-Level OM Perspective
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OMs function focuses on adding value through the transformation process (technical core) of converting inputs into outputs.
Physical:

manufacturing Locational: transportation Exchange:retailing Storage: warehousing Physiological: health care Informational: telecommunications

Factors of Production
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Land Labor Capital Enterprise

The Transformation Process within OM

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Productive Use of Resources

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Input=Output + Waste Input/Input=Output/Input + Waste/Input 1=Productivity + Wastivity Productivity=Output/Input

Operations Decision Making

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Marketplace

Corporate Strategy

Finance Strategy

Operations Strategy

Marketing Strategy

Operations Management

People Materials & Customers

Plants

Parts

Processes Products & Services

Planning and Control

Input

Output

The Transformation Process (value adding)

Value Chain
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Customer (requirements on suppliers)

Conversion/Transformation Process Process primarily adds value to inputs to provide outputs to the customer

Customer Requirements

Input from Suppliers

Output to Customer

Requirements on management

Effective and efficient use of all factors of conversion/transformation

The Value Chain and Its Support Functions

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Key OM Concepts
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Efficiency - Doing something at the lowest possible cost

Effectiveness - Doing the right things to create the most value for the organization

Value - Quality divided by price

Input-Transformation-Output Relationships for Typical Systems

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OMs Contributions to Society

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Higher Standard of Living

Ability

to increase productivity Lower cost of goods and services

Better Quality Goods and Services

Competition

increases quality

Concern for the Environment

Recycling

and concern for air and water quality design and employee participation

Improved Working Conditions

Better job

Services as a Percent of Gross Domestic Product (GDP) for Different Countries

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Differences Between Goods and Services

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Goods
Tangible Can

Services
Intangible Cannot

be inventoried No interaction between customer and process

be inventoried Direct interaction between customer and process

Most Products Are a Bundle of Goods and Services

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An Expanded Definition of Quality

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Quality is important in all functional areas of an organization. Quality is now much more than the technical requirements for manufactured goods. Service quality (customer relationships) is equally important.

A New Paradigm for OM

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Post-War U.S. Dominance in Manufacturing

Available

capacity built to support the war effort Pent-up demand for consumer goods Destruction of overseas production capabilities

Proactive Operations Function

Add

value to products, increase profit margins. Compete on dimensions other than costs:
Quality Speed of

delivery Process flexibility

The Ever-Changing World of OM

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Increased Global Competition

Transformation into

a global economy Pressure to excel on multiple competitive dimensions Increased emphasis on logistics

Advances in Technology
Information

technology (IT) Internet and e-commerce (B2B) Automation and robotics

Ford Escort 2013

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Fords Global Network to Support the Manufacturing of the Escort

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Linking OM to Customers and Suppliers

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Benefits of Buffering the Transformation Process

The

process was not disturbed by environmental interaction. The process was often more efficient than input and distribution processes. Productivity was maximized when processes operated at continuous rates. Process management skills were different from those of other functional activities.

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Linking OM to Customers and Suppliers

Disadvantages of Buffering the Transformation Process

Information

lag in interaction with other functional

activities. Lack of communication between customers and the shop floor for problem solving.

Value Chain
Steps

an organization requires to produce a good or a service regardless of where they are performed.

Line and Staff Jobs in OM

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Inputs Provided by OM to Other Functional Areas

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WHAT OPERATIONS MANAGERS DO?

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Plan Organize Staff Lead Control

Planning
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The process of deciding what to do.

Planning is forward looking.

When planning is operational, the planning horizon is shorter and the level of detail within is greater. When strategic, the planning horizon is long and done in less detail.

Planning(contd.)
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Effective planning seeks to answer questions such as: What should the firm do? The output of this process are goals and objectives. When must the firm achieve these goals? The output is a schedule defining milestones and due dates. Who is responsible for doing it? The outputs are assigned responsibilities. How should this be done? The outputs may be directions or plans of action. How should performance be measured? The output includes standards of performance.

ANALYSING
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The process of making sense of data that is often: poorly structured, incomplete, inconsistent, inaccurate, and/or available in overwhelming quantities. Analysis supports the planning process by providing the facts in useful formats that can then be used to evaluate business alternatives. Analyzing also supports managements control activity by providing the basis for corrective actions.

ORGANIZING
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The process of building organization structures and interrelated task coordination teams. In the past, organizing dealt mostly with humans, but increasingly it involves data-gathering. A good organizer seeks for
The

right person The right information In the right form At the right time

DIRECTING/IMPLEMENTING
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An action-oriented process that carries out the outputs of the first three management activities. This is where money is made and lost (!). In this process, management expends resources to perform the tasks defined by the planning process.

CONTROLLING
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The process of measuring the results of the other four management activities.
Were

the plans any good? Did the analysis provide meaningful information to the other processes? How well did we organize our resources to get the job done? How well did we do it?

10 CRITICAL DECISIONS
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Service, product design Quality management Process, capacity design Location Layout design Human resources, job design. Supply-chain management Inventory management Scheduling Maintenance

ENVIRONMENTAL CONCERNS
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Solid Waste Liquid Waste Atmospheric Pollution Noise Pollution

SECTION OF OM
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Procurement (Purchasing) Practices

reviews guidelines for buying various materials

from suppliers and vendors - materials, including computers, services from lawyers, insurance, etc.

Management Control and Coordinating Function

includes a broad range of activities to ensure

that organizational goals are consistently being met in an effective and efficient fashion

SECTION OF OM
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Product and Service Management

the major activities involved in product and service

management are similar to those in operations management. However, operations management is focused on the operations of the entire organization, rather than managing a product or service.

Quality Management
is crucial to effective operations management,

particularly continuous improvement. More recent advancements in quality, such as benchmarking and Total Quality Management, have resulted in advancements to operations management as well.

SECTION OF OM
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Inventory Management
Costs can be substantial to store and move

inventory. Innovative methods, such as Justin-Time inventory control, can save costs and move products and services to customers more quickly.

Logistics and Transportation Management

Focused on the flow of materials and goods

from suppliers, through the organization and to the customers, with priority on efficiency and cost effectiveness.

SECTION OF OM
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Facilities Management
Depnds a great deal on effective management of

facilities, such as buildings, computer systems, signage, lighting, etc.

Configuration Management
It's important to track the various versions of products

and services. Consider the various versions of software that continually are produced, each with its own version number. on the

Distribution Channels
The means of distribution depend very much

nature of the product or service.

WHERE ARE THE OM JOBS?

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Technology/methods Facilities/space utilization Strategic issues Response time People/team development Customer service Quality Cost reduction Inventory reduction Productivity improvement