Professional Documents
Culture Documents
Introduction to
Operations
Management
1-2
Learning Objectives
Differentiate between design and operation
of production systems
Describe the key aspects of operations
management decision making
Briefly describe the historical evolution of
operations management
Identify current trends that impact operations
management
1-3
Operations Management
Operations Management is:
The management of systems or processes
that create goods and/or provide services
1-4
The Organization
Figure 1.1
Organization
1-5
Value-Added Process
Figure 1.2
The operations function involves the conversion of
inputs into outputs
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback
Control
Feedback Feedback
1-6
Value-Added and Product Packages
Value-added elements make the difference
between the cost of inputs and the value or
price of outputs.
Product packages are a combination of
goods and services.
Product packages can make a company
more competitive.
1-7
The Goods–Service Continuum
Figure 1.3
Goods Service
Surgery, teaching
1-8
Food Processor
Table 1.2
1-9
Hospital
Table 1.2
1-10
Manufacturing or Service?
Tangible Act
1-11
Production of Goods
vs. Delivery of Services
Production of goods – tangible output
Delivery of services – an act
Service job categories
Government
Wholesale/retail
Financial services
Healthcare
Personal services
Business services
Education
1-12
Key Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
1-13
Key Differences
6. Production and delivery
7. Quality assurance
8. Amount of inventory
9. Evaluation of work
10. Ability to patent design
1-14
Goods vs. Service
Table 1.3
1-17
Figure 1.4a
50
70
40 64 36
75
30 58 42
80 44 46
20
85 43 57
10
90 35 65
0
95 25 75
45 50 55 60 65 70 75 80 85 90 95 00 02 05
00 30 70
02 25 75 Year
Figure 1.4b
1-19
Decline in Manufacturing Jobs
Productivity
Increasing productivity allows companies to
maintain or increase their output using fewer
workers
Outsourcing
Some manufacturing work has been outsourced
to more productive companies
1-20
Challenges of Managing Services
Service jobs are often less structured than
manufacturing jobs
Customer contact is higher
Worker skill levels are lower
Services hire many low-skill, entry-level workers
Employee turnover is higher
Input variability is higher
Service performance can be affected by worker’s
personal factors
1-21
Key Decisions of Operations Managers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed/Resources allocated
Who
To do the work
1-22
Operations Management Decision
Making
Models
Quantitative approaches
Performance metrics
Analysis of trade-offs
Systems approach
Establishing priorities
Ethics
1-23
Decision Making
Models
Quantitative approaches
Performance metrics
Analysis of trade-offs
Systems approach
Establishing priorities
Ethics
1-24
Models
A model is an abstraction of reality.
– Physical
– Schematic
– Mathematical Tradeoffs
1-25
Models Are Beneficial
Easy to use, less expensive
Require users to organize
Increase understanding of the problem
Enable “what if” questions
Consistent tool for evaluation and
standardized format
Power of mathematics
1-26
Limitations of Models
Quantitative information may be emphasized
over qualitative
Models may be incorrectly applied and
results misinterpreted
Nonqualified users may not comprehend the
rules on how to use the model
Use of models does not guarantee good
decisions
1-27
Quantitative Approaches
Linear programming
Queuing techniques
Inventory models
Project models
Statistical models
1-28
Performance Metrics
To control different aspects of operations
Many: Profits
Costs
Quality
Productivity
Assets
Inventory
Schedules
Forecast accuracy 1-29
Analysis of Trade-Offs
Decision on the amount of inventory to stock
Increased cost of holding inventory
vs.
Level of customer service
1-30
Systems Approach
“The whole is greater than
the sum of the parts.”
Suboptimization
1-31
Establishing Priorities
Pareto phenomenon
A few factors account for a high
percentage of the occurrence of some
event(s).
80–20 Rule: 80% of problems are caused
by 20% of the activities.
How do we identify the vital few?
1-32
Ethical Issues
Financial statements
Worker safety
Product safety
Quality
Environment
Community
Hiring/firing workers
Closing facilities
Worker’s rights
1-33
Overlap of Business Functions
Figure 1.5
Operations
Finance Marketing
1-34
Operations Interfaces
Figure 1.6
Legal
Public
Relations
Accounting
Operations
Personnel/
Human
resources
MIS
1-35
Historical Summary of
Operations Management
Industrial revolution (1770s)
Scientific management (1911)
Mass production
Interchangeable parts
Division of labor
Human relations movement (1920–60)
Decision models (1915, 1960–’70s)
Influence of Japanese manufacturers
1-36
Trends in Business
Major trends
The Internet, e-commerce, e-business
Management technology
Globalization
Management of supply chains
Outsourcing
Agility
Ethical behavior
1-37
Management Technology
Technology: The application of scientific
discoveries to the development and
improvement of goods and services
Product and service technology
Process technology
Information technology
1-38
Simple Product Supply Chain
Figure 1.7
1-39
A Supply Chain for Bread
1-40
Other Important Trends
Operations strategy
Working with fewer resources
Revenue management
Process analysis and improvement
Increased regulation and product liability
Lean production
1-41