G.O Module 1

• Operations Management - The management of systems or processes that create goods and/or provide services
• The distinct –active- role of operations:

  Inputs   become   Outputs   after    some    Transformation
• Operations example in Manufacturing: Food Processing

  INPUTS - Raw vegetables, metal sheets

  PROCESS - Cleaning, cutting/welding

  OUTPUTS - Cleaned vegetables, cans
• Operations example in service: 

  Health care

  Inputs - Doctors, nurses

  Processing - Examination, surger

  Outputs - Healthy patients
• Operations Management

  Core of all business organizations

  •Many areas interrelated with OM activities

  •Management of operations is critical to create and maintain competitive advantages
• Types of Operation

  Operation

  Goods producing

  Storage/transportation

  Exchange

  Entertainment

  Communication

  Example

  Farming, mining, construction

  Warehousing, trucking, mail, taxis, buses, hotels, location

  Trade, retailing, wholesaling, renting, leasing, loans

  Radio, movies, TV, concerts, recording

  Newspapers, journals, magazines, radio,

  TV, telephones, satellite
• 3 basic functions

  Operations

  Marketing

  Finance
• Operations/Production 

  •Goods oriented (manufacturing and assembly)

  •Service oriented (health care, transportation and retailing)

  •Value-added (the essence of the operations functions)
• Finance-Accounting

  •Budgets (plan financial requirements)

  •Economic analysis of investment proposals

  •Provision of funds (the necessary funding of the operations)
• Marketing

  •Selling

  •Promoting

  •Assessing customer wants and needs

  •Communicating those needs to operations

  •The need for working closely
• Operations Interfaces

  • Industrial engineering
  • Maintenance
  • Public relations
  • Personnel
  • Accounting
  • Purchasing
  • Distribution
• Systems (Holistic) Approach

  •Emphasizes interrelations among subsystems.

  •A systems approach is essential whenever something is being designed, redesigned, implemented, or improved.  It is important to take into account the impact on all parts of the system.

   

  •Example: A new feature is added to a product.

  •Designer must take into account how customers will view the change, instruction for using new feature, the cost, training of workers, production schedule, quality standard, advertising must be informed about the new feature.
• Value added: The difference between the cost of inputsand the (market or fair) value or price of outputs.
• Degree of Standardization

  Standardized output

  •Take advantage of standardized methods, less skilled workers, materials…

  •Example: Iron, Wheat, most of commodities

  Customized output 

  •Each job is different

  •Workers must be skilled

  •Example: Hair cut
• Production of goods (goods oriented)

  •Tangible products 

  •Automobile

  •Refrigerator

  Services (TV and auto repair, lawn care)

  •Government

  •Regulatory bodies, FAA, FDA

  •Wholesale/retail

  •Financial services

  •Education
• Goods vs. Service Operations (Cont)

  •Differences

  1. Customer contact 2. Uniformity of input

  3. Labor content of jobs

  4. Uniformity of output

  5. Measurement of productivity

  6. Production and delivery

  7. Quality assurance

  8. Amount of inventory
• Responsibilities of Operations Management

  •Planning

  •Capacity, utilization

  •Location

  •Choosing products or services

  •Make or buy

  •Layout

  •Projects

  •Scheduling

  •Market share

  •Plan for risk reduction, plan B?

  •Forecasting
• Operations Managers

  Controlling

  •Inventory

  •Quality

  •Costs

  Organization

  •Degree of standardization

  •Subcontracting

  •Process selection

  Staffing

  •Hiring/lay off

  •Use of overtime

  •Incentive plans

  •Job assignments
• What type of models

  •Simulation models : to test a proposed idea

  – Monte Carlo Simulation 

  •Optimization models : to create an optimal idea

  – Linear programming

  •Pattern recognition models : to recognize a pattern

  – Statistics, Forecasting, data mining
• Decision Making

  •Models

  •Quantitative approaches

  •Analysis of trade-offs

  •Systems approach
• Help comes from Models

  •A structure which has been built purposefully to exhibit features and characteristics of some other object.
• Models Are Beneficial

  •Easy to use, less expensive

  •Require users to organize

  •Increase understanding of the problem

  •Consistent tool

  •Standardized format 

  •Specific objectives

  •Systematic approach to problem solving

  •Analysis of tradeoffs 

  •Enable “what if” questions

  •Power of mathematics
• 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.
• Historical Evolution of Operations Management

  •Industrial revolution (1770’s)

  •Scientific management (1911)

  -Mass production

  -Interchangeable parts

  -Division of labor

  •Human relations movement (1920-60)

  -Unemployment insurance

  -Pension plans

  •Decision models (1915, 1960-70’s)

  •Influence of Japanese manufacturers (1970-1990)
• Trends in Business

  Major trends

  The Internet, e-commerce, e-business

  Management technology

  Globalization

  Management of supply chains

  Agility
• Production systems classified

  •Craft Production : System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods.

  -Carpenter

  •Lean production : System that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety.

  -Dell

  •Mass production: System in which lower-skilled workers use specialized machinery to produce high volumes of standardized goods.

  -Ford
• Supply Chain -  A sequence of activities and organizations involved in producing and delivering a good or service
• Keys to being an agile manufacturer are : 

  •Reduction in inventories, 

  •Reduction in turnaround times, 

  •Availability of automated flexible machinery, 

  •Rapid collection and processing of information
• Production systems classified Agile=Lean manufacturing

  •It provides flexibility to switch quickly and economically from one product design to another with little disruption. This characteristic, in turn enables faster response to changes in customer demand.

  •A sophisticated computerized inventory control system allows the plant to keep track of large number of parts.
• Simple Product Supply Chain

  Suppliers-direct suppliers-producer-distributor-final consumer
• Other Important Trends

  •Ethical behavior

  •Operations strategy

  •Working with fewer resources

  •Cost control and productivity

  •Quality and process improvement

  •Increased regulation and product liability

  •Lean production

   
• Recent Trends

  •Worker involvement

  •Environmental issues, emission reductions are popular after Central European floods

  •Service economy in US, foreign production

  •E-business – information technology

  •Supply chain management

  •Total Quality Management

  •Globalization, emerging markets, NAFTA
• The goods and services continuum enables marketers to see the relative goods/services composition of total products.
• Scope of Operations Management

  Forecasting

  Capacity planning

  Scheduling

  Managing inventories

  Assuring quality

  Motivating employees

  Deciding where to locate facilities
• Value-Added

  • Input

  Land

  Labor

  Capital

  • Outputs

  Goods

  Services
• Operations Managers

  Controlling

  •Inventory

  •Quality

  •Costs
• Operations Manager

  Organization

  •Degree of standardization

  •Subcontracting

  •Process selection
• Operations Manager

  Staffing

  •Hiring/lay off

  •Use of overtime

  •Incentive plans

  •Job assignments
• Operations Manager

  Controlling

  Organization

  Staffing