Fundamentals of

Operations Management
BUS 3 – 140

Mr. Jess Marino

Spring, 2008
Agenda

– Introduction

– Green Sheet review and other administrative items

– Additional comments on the course

– Initial Lecture

Page 2 2
Introduction
Marino Background

Academics
– Graduate in Production and Operations Management
– Product of CSU system (San Diego State)
– Developed and presented several courses as a Management Consultant

Supply Chain Experience

– Over 25 years as a practitioner at all levels of responsibility
 Leadership in small and large organizations
 Many different hourly and professional jobs
 Over eight years as a Management Consultant
– Certified in Production and Operations Management by the Association for
Operations Management (APICS)
– Exposure to many industries and organizations
– Have done business in 13 countries throughout the world

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Positions Held

Director of Operations

Director of Supply Chain Management

Director of Materials

Production Control Executive Director

Manager of Fulfillment

Production Production Material Stockroom

Buyer
Supervisor Controller Controller Manager

Machine Mail Room

Operator Clerk

Production Warehouse
Expediter Clerk

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Have conducted Business in 13 Countries, Worldwide

SCOTLAND
CANADA ENGLAND HOLLAND
FRANCE

UNITED STATES
CHINA
TAIWAN
MEXICO THAILAND
HONG KONG

SINGAPORE
MALAYSIA

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Green Sheet Review
Student Information Sheet

NAME

MAJOR (and Emphasis)

CURRENT JOB (Company Optional)

PREVIOUS SUPPLY CHAIN JOBS / EXPERIENCE

OTHER

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Course Overview and Objectives

– Understanding how the Operations function interrelates with other functional

organizations in a business

– Understanding how an organization uses its resources, processes, data,

and technologies to create goods and provide services to customers

– Understanding how operational effectiveness can be a critical success

factor in determining an organization’s Revenue, Profitability, and
Shareholder return

– Understanding the managerial responsibility for Operations, even when

production is outsourced, or done in regions far from corporate
headquarters

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Student Learning Objectives for the Course

– Understand how Operations is relevant to all functions of a business,

and all majors within a Business education

– Understand Operations Management and how it fits within the overall

organization strategy, objectives, and competitiveness

– Develop an interest in Operations and apply that understanding,

whether in a manufacturing or service career

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Course Introduction
Operations is a Key Element of a Supply Chain

Revenue Cash

Utilization of Assets Inventory

(People, Plant, Equip)

BALANCING keeping Customers completely satisfied and Resources

optimally utilized ……. against spending the least amount of Cash
and carrying the least amount of Inventory

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Scope of this Course

Customer Production Materials Customer

Production Shipping
Demand Scheduling Mgmt Service

• Forecasting • Demand & • Inventory • Process

Supply Mgmt Layout
• Aggregate
Matching • MRP • Work
Planning
• Scheduling System
• Strategic • ERP
Design
Capacity • Just In Time
Planning (JIT) • Lean
Operations
• Project
Mgmt • Quality

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Highest Level Operations Management Process (Fig 1.2)

Process
Inputs Outputs
(Transformation)

Feedback

Feedback Feedback
Control

There is a CONVERSION that takes Information, Intelligence,

Resources, and Activities and turns them into something
VALUABLE to Customers and / or Society

* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin Page 14 14
Inputs / Process / Outputs (Table 1.1)
Inputs Transformation Outputs
Land Processes High GOODS percentage
Human Cutting, drilling Houses
Physical Labor Transporting Automobiles
Intellectual Labor Teaching Clothing
Capital Farming Computers
Raw Materials Mixing Machines
Energy Packing Televisions
Water Copying, faxing Food products
Metals Textbooks
Wood CD players
Equipment High SERVICE percentage
Machines Health care
Computers Entertainment
Trucks Car Repair
Tools Delivery
Facilities Legal
Hospitals banking
Factories Communication
Retail Stores Other
Other Innovation
Information
Time
Legal Constraints
Gov't Regulations

* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin Page 15 15
Operations are managed for both Production and Services

Food processing Plant

Inputs Process Outputs
PRODUCTION

• Raw vegetables • Cleaning

• •
Canned Vegetables
Metal sheets Making cans
• Water • Cutting
• Energy • Cooking Result is
• Labor • Packing
• Building • Labeling
TANGIBLE OUTPUT
• Equipment

Inputs Process Outputs

SERVICE
Hospital

• Doctors, nurses • Examination

Treated Patients
• Hospital • Surgery
• Medical supplies • Monitoring
• Equipment • Medication
• Laboratories • Therapy Result implies
an ACT

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Differences between Goods and Service (Book Table 1.3)
Characteristic Goods Services

Customer contact Low High

Uniformity of Input High Low

Labor content Low High

Uniformity of Output High Low

Output Tangible Intangible

Measurement of Productivity Easy Difficult

Opportunity to correct quality problenms before

High Low
delivery to customer

Inventory Much Little

Evaluation Easier More difficult

Patentable Usually Not usually

* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin Page 17 17
Goods and Services continuum (Fig 1.3)

Goods Service

Surgery, teaching

Songwriting, software development

Computer repair, restaurant meal

Automobile repair, fast food

Home remodeling, retail sales

Automobile assembly , steelmaking

* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

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Combination of Production and Service

Farmer
produces &
Wheat
harvests
shipped
wheat
to mill Mill
($0.15)
($0.08) produces
Flour
flour
shipped
($0.15)
to Baker Baker produces bread ($0.54)
($0.08) Bread
shipped
to Grocery store
Grocery displays and
Store sells bread
($0.08) ($0.21)

$1.29 of total Cost and Profit throughout the Supply Chain

$0.84 of Production $0.45 of Services

* Adapted from Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin Page 19 19
Manufacturing Jobs

U.S. Manufacturing vs. Service Employment

90
80 > 70%
Mfg.
70 Service
60
Percent

50
40
30
20
10
0
45 50 55 60 65 70 75 80 85 90 95 00 02 05
Year
• Greater PRODUCTIVITY allows for increased output with fewer workers
• Many manufacturing jobs have moved OFFSHORE to lower labor cost areas

* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

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How Operations Interacts
with Other Organizations
Key intersections with Sales & Marketing and with Finance

FINANCE & ACCOUNTING

– Budgeting
– Authorizing Capital spending
– Authorizing major inventory buys
– Cost accounting
– Make vs. Buy decisions
– Location planning
– Managing international trade
– Analyzing trade-off decisions

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Key intersections with Sales & Marketing and with Finance

SALES & MARKETING

– Forecasting Demand
– Influencing demand
– Committing supply
– Negotiating schedules with customers
– Providing competitive information
– Requesting new products and services
– Opening new markets

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Interaction with other Functional Organizations

Organization Key Interaction

IT ERP Application Support

Transaction Timing and accuracy

Reporting

Decision-support tools

Human Resources Training

Recruiting

Management development

Regulatory compliance

Legal Contract administration

Supplier relations

Offshoring

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