OPERATIONS MANAGEMENT

• Operations Management


  The management of systems or processes that create goods and/or provide services
• Operations


  The part of an organization that is responsible for producing goods and/or services
• Goods


  • Physical items inclusive or raw materials, parts, sub-assemblies such as engine system used in cars and final products such as computers
• Services


  • Activities that provide a combination of time, location, form, and psychological values
• Three basic functional areas

  • Finance
  • Marketing
  • Operations
• Finance


  Responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations
• Marketing


  Responsible for assessing consumer wants and needs, and selling and promoting the organization's goods or services
• Operations


  Responsible for producing the goods or providing the services offered by the organization
• Creation of goods or services


  Transforming or converting inputs into outputs
• Inputs


  • Land
  • Human
  • Capital
  • Raw Materials
  • Equipment
  • Facilities
  • Other (Information, Time, Legal Constraints, Governments Regulations)
• Transformation


  • Cutting
  • Drilling
  • Transporting
  • Teaching
  • Farming
  • Mixing
  • Packing
  • Copying
  • Faxing
• Outputs


  • Houses
  • Automobiles
  • Clothing
  • Computers
  • Machines
  • Health Care
  • Entertainment
  • Car Repair
  • Delivery
  • Legal
  • Innovation
• Value-added


  The difference between the cost of inputs and the value or price of outputs
• Scope of operations management

  • Product and service design
  • Process selection
  • Selection and management of technology
  • Design of work systems
  • Location planning
  • Facilities planning
  • Quality improvement of the organization's products and services
• Operations function includes


  • Forecasting
  • Capacity Planning
  • Scheduling
  • Managing Inventories
  • Assuring Quality
  • Motivating and Training employees
  • Location Facilities
• Key decisions made by operations managers


  • What: What resources will be needed, and in what amounts?
  • When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? When is corrective action needed?
  • Where: Where will work be done?
  • How: How will the product or service be designed? How will the work be done? How will resources be allocated?
  • Who: Who will be done?
• Competitiveness


  The effectiveness of an organization in the marketplace relative to other organizations that offer similar products or services
• Ways marketing influences competitiveness

  • Identifying consumer wants and/or needs
  • Pricing
  • Advertising and promotion
• Ways operations influence competitiveness

  • Product and service design
  • Cost
  • Location
  • Quality
  • Quick response
  • Flexibility
  • Inventory management
  • Supply chain management
  • Service
  • Managers and workers
• Reasons organizations fail


  • Putting too much emphasis on short-term financial performance at the expense of research and development
  • Failing to take advantage of strengths and opportunities, and/or failing to recognize competitive threats
  • Neglecting operations strategy
  • Placing too much emphasis on product and service design and not enough on process design and improvement
  • Neglecting investments in capital and human resources
  • Failing to establish good internal communications and cooperation among different functional areas
  • Failing to consider customer wants and needs
• Mission


  The reason for an organization's existence, expressed in its mission statement
• Goal


  Provide detail and describe the scope of the mission
• Tactics


  The methods and actions used to accomplish strategies, more specific than strategies
• Productivity


  A measure of the effective use of resources, usually expressed as the ratio of output to input
• Forecast


  A statement about the future value of a variable of interest
• Two uses for forecasts

  • Plan the system (long-range plans)
  • Plan the use of the system (short-range and intermediate-range planning)
• Uses of forecasts in business organizations

  • Accounting
  • Finance
  • Human Resources
  • Marketing
  • MIS
  • Operations
  • Product and Service Design
• Elements of a good forecast

  • Timely
  • Accurate
  • Reliable
  • Expressed in meaningful units
  • In writing
  • Simple to understand and use
  • Cost-effective
• Forecasting process


  1. Determine the purpose of the forecast

  2. Establish a time horizon

  3. Select a forecasting technique

  4. Obtain, clean, and analyze appropriate data

  5. Make the forecast

  6. Monitor the forecast
• Forecasts based on judgment and opinion

  • Executive opinions
  • Salesforce opinions
  • Consumer surveys
• Time series


  A time-ordered sequence of observations taken at regular intervals
• Components of time series

  • Trend
  • Seasonality
  • Cycles
  • Irregular variations