Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-1 INTRODUCTION PART ONE UNM Management 300 Operations Management Monday/Wednesday 8:00 9:15 am
McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-2 Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-3 Operations Management Organization Finance Operations Marketing The management of systems or processes that create goods and/or provide services
Text Book Definition Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs
McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-4
The Heritage of Operations Management
Division of labor (Adam Smith 1776 and Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Coordinated assembly line (Ford/Sorenson/Avery 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922 Quality control (Shewhart 1924; Deming 1950) Computer (Atanasoff 1938) CPM/PERT (DuPont 1957) McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-5
The Heritage of Operations Management Cont Material requirements planning (Orlicky 1960) Computer aided design (CAD 1970) Flexible manufacturing system (FMS 1975) Baldrige Quality Awards (1980) Computer integrated manufacturing (1990) Globalization(1992) Internet (1995)
For 25 Extra Credit points Find at least three significant innovations that have happened in OM since 1995. Due Next Monday 8/30 For 25 Extra Credit Points: Find at least 3 significant changes/innovations in OM that have occurred since 1995. Due Monday 8/30/04 McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-6 MY CHOICE FOR THE BIG GUNS OF OPERATIONS MANAGEMENT
Eli Whitney Born 1765; died 1825 In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications Musket parts could be used in any musket 1995 Corel Corp. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-7 My Chocie For the Big Guns of Operations Research
Frederick W. Taylor Born 1856; died 1915 Known as father of scientific management In 1881, as chief engineer for Midvale Steel, studied how tasks were done Began first motion & time studies Created efficiency principles 1995 Corel Corp. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-8 My Choice For The Big Guns Of Operations Management Frank & Lillian Gilbreth Frank (1868-1924); Lillian (1878-1972) Husband-and-wife engineering team Further developed work measurement methods Applied efficiency methods to their home & 12 children! (Book & Movie: Cheaper by the Dozen, book: Bells on Their Toes) 1995 Corel Corp. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-9 My Choice For The Big Guns Of Operations Management Henry Ford In 1903, created Ford Motor Company Born 1863; died 1947 In 1913, first used moving assembly line to make Model T Unfinished product moved by conveyor past work station Paid workers very well for 1911 ($5/day!) Make them all alike! 1995 Corel Corp. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-10 My Choice For The Big Guns of Operations Management W. Edward Deming Born 1900; died 1993 Engineer & physicist Credited with teaching Japan quality control methods in post-WW2 Used statistics to analyze process His methods involve workers in decisions McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-11 Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees And more . . . Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-12 Business Operations Overlap Marketing Operations Finance Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-13 Operations Management Enables You To Be Competitive On:
Cost Quality Flexibility Speed To Market
McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-14 Steel production Automobile fabrication House building Road construction Dressmaking Farming Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing Low service content High goods content High service content Low goods content Increasing goods content Increasing service content Goods-service continuum Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-15 Stage of Production Value Added Value of Product Farmer produces and harvests wheat $0.15 $0.15 Wheat transported to mill $0.08 $0.23 Mill produces flour $0.15 $0.38 Flour transported to baker $0.08 $0.46 Baker produces bread $0.54 $1.00 Bread transported to grocery store $0.08 $1.08 Grocery store displays and sells bread $0.21 $1.29 Total Value-Added $1.29 Introduction to Operations Management Ops Management Is All About Value Added McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-16 Value-Added The difference between the cost of inputs and the value or price of outputs. Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Management Feedback Feedback Feedback Value added Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-17 Operations Management Interfaces Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-18 OM Strategy/Decision Making Determines: System Design
Capacity/based on Forecasts
Location/based on customers
Arrangement of departments/based on productivity
Product and service planning/based on customer demands
Acquisition and placement of equipment/based on productivity
Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-19 OM Strategy/Decision Making Determines: System operation personnel inventory scheduling project management quality assurance Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-20 Type of Operations We Will Cover
Project Aircraft carrier Batch production Printers Mass production Automobiles Continuous production Gasoline
Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-21 Key Differences Between Production & Services Amount of Customer contact Uniformity of inputs Labor content Uniformity of output Measurement of productivity Quality assurance These differences are beginning to fade in many cases Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-22 Manufacturing vs Service Characteristic Output Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Opportunity to correct Manufacturing Tangible Low High Low High Easy High Service Intangible High Low High Low Difficult Low quality problems High Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-23 Type of Models A model is an abstraction of reality used to aid management decision making.
Physical/ e.g. Plant Layout
Schematic/Product Blueprint
Mathematical/Forecast Model What are the pros and cons of models? Tradeoffs Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-24 Quantitative Modeling Approaches We Will Study Linear programming Queuing Techniques Inventory models Project models Statistical models Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-25 Responsibilities of an Operations Manager Products & services Planning
Capacity
Location
Make or buy
Layout
Projects
Scheduling Controlling
Inventory
Quality
Organizing
Degree of centralization
Subcontracting Staffing
Hiring/laying off
Use of Overtime Directing
Incentive plans
Issuance of work orders
Job assignments Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-26 Systems Approach The whole is greater than the sum of the parts. But what is the whole system? Peter Checkland has pointed out that there are no such things as systems in the real world waiting to be identified; rather we choose to identify a certain collection of people and things as a system. To talk about systems is to talk about a way of looking at the world, not the way.
Suboptimization Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-27 Pareto Phenomenon A vital few things are important for reaching an objective or solving a problem. 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few? Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-28 Pareto and Juran How Pareto got credit proving that you can get credit even when you dont deserve it. All you need is to have it sound good.
In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's Principle. While it may be misnamed, Pareto's Principle or Pareto's Law as it is sometimes called, can be a very effective tool to help you manage effectively. Where It Came From After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of expertise. Quality Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s recognized a universal principle he called the "vital few and trivial many" and reduced it to writing. In an early work, a lack of precision on Juran's part made it appear that he was applying Pareto's observations about economics to a broader body of work. The name Pareto's Principle stuck, probably because it sounded better than Juran's Principle. As a result, Dr. Juran's observation of the "vital few and trivial many", the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto's Principle or the 80/20 Rule. You can read his own description of the events in the Juran Institute article titled Juran's Non-Pareto Principle. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-29 The Internet E-Business Supply Chain Management Recent Trends (Last 10 Years) Effecting/Changing OM Principles
Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-30 Suppliers Suppliers Direct Suppliers Producer Distributor Final Consumer Simple Product Supply Chain (But It Never Really Looks Like This) Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-31 The Things In OM That Havent Changed Quality and process improvement Technology Globalization Operations strategy Environmental issues Introduction to Operations Management