Introduction to Operations Management

Case Study 1 (GEMI)

Learning Objectives
y Define Operations Management (OM) y Explain the role of OM in business y Describe the OM s Transformation process y Describe the differences between service and manufacturing operations y Understanding OM in an Organizational Chart y Identify major historical developments in OM y Identify current trends in OM

What is Operations Management?
Operations Management (OM) is defined as the business function responsible for design, operation and improvement of the systems that create and deliver the firm s primary products and services.

What is Operations Management?
y OM is a functional field of business with clear line management responsibility. y Within the operations function, management decisions can be divided into ; 

Strategic (long-term) decisions,  Tactical (intermediate-term) decisions,  Operational Planning and control (short- term)


OM Decisions

What is Operations Management Role?
y OM Transforms inputs to outputs 
Inputs are resources such as

People or customers, Raw Material or a finished product from another system and Money 

Outputs are goods and services
Patients Input octors, nurses, edical supplies, equip ents Resources Health care Transfor ation Healthy individual Output

OM s Transformation Process

OM s Transformation Role 
To add value
y Increase product value at each stage y Value added is the net increase between output product

value and input material value 
Provide an efficient transformation
y Efficiency

perform activities well at lowest possible


Differences between Services Organization and Manufacturers
y Services: 
Intangible product  Product cannot be inventoried  High customer contact  Short response time  Labor intensive

y Manufacturers: 
Tangible product  Product can be inventoried  Low customer contact  Longer response time  Capital intensive

y y y y y y y y y

All use technology Both have uality, productivity, & response issues All must forecast demand Each will have capacity, layout, and location issues All have customers, suppliers, scheduling and staffing issues Manufacturing often provides services Services often provides tangible goods Some organizations are a blend of service/manufacturing / Quasi-Manufacturing (QM) organizations QM characteristics include
y Low customer contact & Capital Intensive

OM in an Organizational Chart

OM in an Organizational Chart

OM in an Organizational Chart

Historical Development of OM 


Principles of Scientific management y Formalized time-study and work-study concepts (F. W. Taylor) --Motion Study (Frank & Industrial psychology Lillian Gilbreth) --Activity scheduling chart Moving assembly line (Henry Ford & H.L. Gantt) --EOQ applied to inventory Economic lot size control ( F. W. Harris) Quality Control y Sampling inspection and
statistical tables for uality inspection (Walter Shewhart, H.F. Dodge & H.G. Romig) --Activity Sampling for work analysis (Elton Mayo &L.H.C. Tippett)

Hawthorne studies of worker motivation

Historical Development of OM 

Multidisciplinary team approaches y Simplex method of linear programming (George B. to complex system problems Dantzig)
y Simulation, waiting-line theory, 

1950-60s Extensive development of

operations research tools

decision theory, mathematical programming, project scheduling techni ues of PERT and CPM (Many researchers

in US & Western Europe) 

Widespread use of computers in business Service uality and productivity

y Shop scheduling, inventory

control, forecasting, project management, MRP (IBM, Joseph
Orlicky and Oliver Wight)

--Mass production in the service sector (McDonald s restaurants)

Historical Development of OM 
1980s Manufacturing strategy paradigm y Manufacturing as a

competitive weapon JIT, TQC and factory automation
(Harvard Business School faculty)
y Kanban, poka-yokes. CIM, FMS, CAD/CAM, robots, etc. (Tai-Ichi Ohno of Toyota Motors, W.E. Deming & J.M. Juran) y Bottleneck analysis, OPT theory of constraints (Eliyahu M. Goldratt)

Synchronous manufacturing

Historical Development of OM 


y ISO 9000, uality function development, value and concurrent engineering, continuous improvement paradigm (National Institute of Standards
& Technology, American Society of Quality Control & International Organization for Standardization)

Business process reengineering Electronic enterprise

--Radical change paradigm (Michael Hammer & major consulting firms)

-- Internet, World Wide Web (US government, Netscape Communication Corporation & Microsoft Co.) Supply chain management --SAP/R3, client/server software (SAP, Germany; Oracle, US) y Internet, World wide web (Amazon,  2000s E-commerce eBay, America Online, Yahoo!)

Current Issues in Operations Management 
Coordinating the relationships between mutually supportive but separate organizations 
Optimizing global supplier, production and distribution

Increased co-production of goods and services (through

Internet) ***THE END***

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