Introduction

• Operations Management: The design, operation, and

improvement of productive systems

• Operations Management:
– Designs systems
– Ensure quality
– Produce products
– Deliver Services

• In what kind of businesses can you find operations

management?
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 Operations
• Operations: A function or system that
transforms inputs into outputs of greater
value.

• Inputs: Could be materials, machines, labor,

management, and capital.

• Outputs are goods and/or services

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 Creating Value
• The role of operations is to create value.

• Value Chain: A series of activities from

supplier to customer that add value to a
product or service.

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 The Transformation Process can be:

Type of Transformation Process As seen in...

Physical Manufacturing Operations
Locational Transportation or Warehouse Operations
Exchange Retail Operations
Physiological Health Care
Psychological Entertainment
Informational Communication

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 Activities in Operations Management (OM)

• Organizing Work
• Selecting Processes
• Arranging Layouts (Organizar diseños)
• Locating Facilities
• Designing Jobs
• Measuring Performance
• Controlling Quality
• Scheduling Work
• Managing Inventory
• Planning Production 5
 How do operations interact with
finance/accounting departments?
• Finance/Accounting provide:
– Budgets
– Cost analysis
– Capital investments
– Stockholder requirements (requerimientos de los accionistas)

• Operations provide:
– Production and inventory data
– Capital budgeting requests
– Capacity expansion and technology plans

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 How do operations interact with marketing
departments?
• Marketing Provides:
– Sales forecasts (sales forecast)
– Customer orders
– Customers feedback
– Promotions

• Operations Provide:
– Product/service availability (disponibilidad de productos)
– Lead-time estimates (plazos de entrega estimados)
– Status of order
– Delivery schedules

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 How do operations interact with human
resources departments?
• Human Resources Provides:
– Hiring/firing (contratacion/despido)
– Training
– Legal requirements
– Union contract negotiations (Negociaciones de contratos sindicales)

• Operations Provide:
– Personnel needs
– Skill sets
– Performance evaluations
– Job design
– Work measurement (medida de trabajo)

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How do operations interact with suppliers?

• Suppliers Provide:
– Material availability
– Quality data
– Delivery schedules
– Designs

• Operations Provide:
– Orders for materials
– Production and delivery schedules
– Quality requirements
– Design/performance specifications

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 Globalization
• Two thirds of today’s businesses operate globally through
global markets, global operations, global financing, and
global supply chains.

• Globalization includes:
– Selling in foreign markets
– Producing in foreign lands
– Purchasing from foreign suppliers
– Partnering with foreign firms

• Why might a company go global?

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 Rise in Outsourcing of Services (Aumento de la
subcontratación de servicios)

– Accounting (contabilidad)
– Claims processing (procesamiento de reclamos)
– Computer programming
– Call centers
– Brokerage firms (casa de bolsa)
– Financial analysis
– Research and development
– Engineering
– Medical diagnosis
– Architectural design
– More advanced work in information technology 12
 Near-Sourcing
• Near-Sourcing: Bringing supply chain closer to
home.
• Acercando la cadena de suministro a casa.

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Productivity and Competitiveness
• A global marketplace means both more
customers AND more competition.

• Competitiveness: The degree to which a

nation can produce goods and services that
meet the test of international markets while
simultaneously maintaining or expanding the
real incomes of its citizens.

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 Productivity and Competitiveness
• Most common measure of competitiveness is
productivity

• Productivity: The ratio of output to input.

• Increases in productivity allow wages to grow without

producing inflation
• Los aumentos en la productividad permiten que los
salarios crezcan sin producir inflación
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 Productivity and Competitiveness
• Single-Factor Productivity: Compares output
to individual inputs, such as labor hours,
investment in equipment, material usage, or
square footage. (pies cuadrados)

• Multi-Factor Productivity: Relates output to

combination of inputs, such as (labor + capital)
or (labor + capital + energy + materials)

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 Productivity and Competitiveness
• Capital can include the value of equipment,
facilities, inventory, and land.

• Total Factor Productivity: Compares the total

quantity of goods and services produced with
all the inputs used to produce them.

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 Measures of Productivity:
Single-Factor Productivity
•  

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 Measures of Productivity:
Multifactor Productivity
•  

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 Measures of Productivity:
Total Factor Productivity
•  

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 Example: Calculating Productivity
Osborne Industries is compiling the monthly productivity
report for its Board of Directors. From the following data,
calculate

(a) labor productivity,

(b) machine productivity, and
(c) the multifactor productivity of dollars spent on labor,
machine, materials, and energy.

The average labor rate is $15 an hour, and the average

machine usage rate is $10 an hour.
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 Example: Calculating Productivity
• Units produced: 100,000
• Labor hours: 10,000
• Machine hours: 5,000
• Cost of materials: $35,000
• Cost of energy: $15,000

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Productivity Measures can be Deceiving

• Productivity can be increased in several ways

• Decreasing input faster than output can lead

to increasing rates of productivity
– However, company could actually be retrenching

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 Strategy and Operations
• Strategy: Provides direction for achieving a
mission

• Operations and supply chain management

play an important role in corporate strategy.

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 Strategy Formulation Consists of Five Basic
Steps:
• 1. Defining a primary task

• 2. Assessing core competencies (Evaluar las competencias

básicas)

• 3. Determining order winners and order qualifiers

• 4. Positioning the firm

• 5. Deploying the strategy (implementacion de la estrategia)

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 Primary Task
• Primary Task: What the firm is in the business of
doing. (lo que la empresa esta hacienda en el
negocio)
– Don’t define too narrowly (no defina demasiado
estrechamente)
– Example: Norfolk Southern Railways is in the business of
transportation, not railroads.

• Usually defined in a firm’s mission statement.

(declaracion)
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 Core Competencies
• Core Competency: What a firm does better than
anyone else.
– Exceptional Service
– Higher Quality
– Faster Delivery
– Lower Cost.

• Represent sustainable competitive advantage

– Likely to be processes
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 Order Winners and Order Qualifiers

• Order Qualifiers: What qualifies an item to be

considered for purchase.
– Can only take a product so far

• Order Winner: What wins the order.

• Both can evolve over time. (ambos pueden

evolucionar)
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 Positioning the Firm
• Positioning: How a firm chooses to compete

• A company cannot be all things to all people.

• Compete on cost, speed, quality, and flexibility

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 Competing on Cost
• Eliminate all waste (eliminar todos los
desperdicios)

• Produce standardized products for large markets.

• Improve yield by:

– Stabilizing the production process (estabilizando)
– Tightening productivity standards (ajustar)
– Investing in automation

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 Competing on Speed
• Speed: Fast moves, fast adaptations, tight
linkages (vinculos estrechos)

• Time-based competition
– Especially important in fashion industry

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 Competing on Quality
• Quality: A way to please the customer.
Complacer
– Minimizing defect rates(tasas)
– Conforming to design specifications

• Malcolm Baldrige National Quality Award

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 Competing on Flexibility
• Flexibility: The ability to adjust to changes in
product mix, production volume, or design.

• Often means increasing costs (a menudo)

• Mass Customization: The mass production of

customized products. (personalizacion en
masa)
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 Strategy Deployment
• Strategies must be easy to follow, not too general, and realistic.

• Strategy deployment converts a firm’s positioning strategy and resultant

order winners and order qualifiers into specific performance
requirements.
• La implementación de la estrategia convierte la estrategia de
posicionamiento de una empresa y los ganadores de pedidos y
calificadores de pedidos resultantes en requisitos de rendimiento
específicos

• Two types of planning systems to help:

– Policy Deployment (despliegue de politicas)
– Balanced Scorecard (balance de mando integral)

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 Policy Deployment
• Policy Deployment: Translates corporate strategy into
measurable objectives. (objetivos medibles)
– Determine how each goal ties into daily activities.
• Determine cómo cada objetivo se vincula con las actividades
diarias.

• Objectives created at each level of the organization.

• Hoshins: The actions plans generated from the policy

deployment process.
– Cascade of action plans

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 Hoshins Video

https://www.youtube.com/watch?v=sY7CB3Bn
JmY

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 Balanced Scorecard
• Balanced Scorecard: A performance assessment that uses metrics
related to customers, processes, and learning and growing, as well as
financials.
una evaluación de desempeño que utiliza métricas relacionadas con
clientes, procesos y aprendizaje y crecimiento, así como también
finanzas.

• The four critical areas of assessment:

– Finances – How should we look at our shareholders?
– Customers – How should we look at our customers?
– Processes – At which business processes must we excel?
– En que procesos comerciales debemos sobresalir
– Learning and Growing – How will we sustain our ability to change and
improve? (¿Cómo mantendremos nuestra capacidad de cambiar y mejorar?)
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 Balanced Scorecard
• It’s called a balanced scorecard because more than financial measures are used to
assess performance.
• porque se utilizan más que medidas financieras para evaluar el rendimiento.

• Key Performance Indicators (KPI): a set of measures that help managers evaluate
performance in critical areas.

• The score converts the different performance measures into percentage

completed.
• La puntuación convierte las diferentes medidas de rendimiento en porcentaje
completado.

• The mean performance column averages the score for each dimension.
• La columna de rendimiento promedio promedia el puntaje para cada dimensión

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The Balanced Scorecard Video

https://www.youtube.com/watch?v=6AwStmfS
2HY

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 Part 1: Introduction to
Administration of Operations

Ch.1 From Render, Stair, Hanna, and Hale

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