Module 7

• Production


  The process of creating goods and services through a production system
• Production System


  A manufacturing subsystem that combines resources and utilizes various functions to transform inputs into desired outputs
• Components of a Production System


  • Design
  • Production
  • Distribution
  • Servicing
• Input


  • Involves capturing and assembling elements that enter the system to be processed (e.g., raw materials, energy, data, human effort)
• Process


  • Involves transformation processes that convert input into output (e.g., manufacturing process, service processes, sophisticated calculations)
• Output

  • The transformed elements that have been produced by processes to their ultimate form (e.g., finished products, rendered service)
• Categories of Processes

  • Physical
  • Locational
  • Exchange
  • Storage
  • Physiological
  • Informational
• Physical processes

  • Convert raw materials into finished goods (manufacturing industries)
• Locational processes


  • Transportation of an entity from one place to another (transportation services, distribution services)
• Exchange processes

  • Involve retailing, the exchange of a good for money (supermarkets, department stores)
• Storage processes

  • Involve storing of materials prior delivery to consumers or customers (warehousing services)
• Physiological processes

  • Concerned with health care and safety of individuals (health care, grooming, hospitals)
• Informational processes


  • Involve transfer of data, information, or knowledge (telecommunications, information systems, schools)
• Operations Management


  The design, operation, and improvement of systems that create and deliver the firm’s primary product in the most efficient and effective way, while creating value for the product
• Major activities in any organization

  • Finance (including accounting), Marketing, Operations
• Management Process

  Planning, Organizing, Staffing, Leading, Controlling
• Planning


  • Managers determine objectives and goals for organizations and develop programs, policies, and procedures to attain them
• Organizing

  • Managers develop a structure of individuals, groups, departments, and divisions to achieve objectives
• Staffing


  • Managers determine personnel requirements, including recruitment, training, retention, and termination for achieving objectives
• Leading


  • Managers lead, supervise, and motivate personnel to achieve objectives
• Controlling


  • Managers develop standards and communication networks to ensure appropriate plans and objectives are pursued; measure results, evaluate acceptability, and institute corrective action if necessary
• Importance of Operations Management
• Importance of Operations Management

  • OM is one of the three major functions of any organization and is essential to understanding what organizations do. 2. It is one of the costliest parts of any organization and may provide the best opportunity for an organization to improve its profitability. 3. A business education is incomplete without an understanding of the modern approaches to managing operations
• Operations Management (OM) is one of the costliest parts of any organization and may provide the best opportunity for an organization to improve its profitability
• A business education is incomplete without an understanding of modern approaches to managing operations
• Operations Management provides a systematic approach to organizational processes and uses analytical thinking to deal with real-world problems
• Knowledge in operations management is used in various areas such as production planning and control, supply chain management, purchasing and logistics, quality assurance, and process reengineering
• The concepts and tools of Operations Management are widely used in managing other functions such as planning, quality control, and productivity
• Areas of Management Decisions

  • Strategic Decisions
  • Tactical Decisions
  • Planning and Control Decisions
• Strategic Decisions


  Long-term business decisions that impact the company’s long-range effectiveness in terms of addressing customer needs aligned to corporate strategy
• Tactical Decisions

  Intermediate-term decisions that address how to efficiently utilize resources with constraints to strategic decisions
• Planning and Control Decisions


  Short-term decisions that help break down tactical decisions into immediately realizable goals and objectives
• Critical Strategy Related Decisions in OM

  • Product Strategy
  • Process Strategy
  • Location Strategy
• Product Strategy


  Determines production methods, transformation processes, production costs, quality, and human resource decisions
• Process Strategy


  Focuses on how products are made with continuous improvement of the production process
• Location Strategy


  Determines the geographical positioning of operations relative to input resources and other operations or customers
• Location Strategy

  1. Location of a firm is the geographical positioning of its operations relative to input resources, other operations, or customers

  2. Facility location decisions may determine the ultimate success of the operation

  3. Errors made in location decisions may overwhelm other aspects of the business
• Applications of location strategies

  • Location for a new company
  • Relocation of an existing business
  • Business expansion
• Sample strategy options: Near supplier or near customers?
• Layout Strategy

  1. Facility layouts represent the physical arrangement of equipment and different components of a facility

  2. Capacity, use of personnel, procurement, and inventory planning are influenced by layout

  3. Processes and material must be sensibly located in relation to each other