adeyl khan, faculty, bba, nsu agora vs/ meena bazaar vs. pqs boeing missed production deadline …...

Adeyl Khan, Faculty, BBA, NSU

Chapter 1Introduction to OM

Agora Vs/ Meena Bazaar Vs. PQSBoeing missed production deadline …

Why some companies succeed While others fail


Operations Management

Managing that part of the organization responsible for producing goods and servicesManagement of systems or processes that create goods and/or provide services

1-2

Operations Examples

Goods Producing

Farming, mining, construction manufacturing, power generation

Storage/Transportation

Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines

Exchange Retailing, wholesaling, banking, renting, leasing, library, loans

Entertainment Films, radio and television, concerts, recording

Communication Newspapers, radio and television, newscasts, telephone, satellites


Organization’s Basic Functions

1-3

Organization

Finance

Secure Fin. Resources

Budgeting

Funding …

Operations

Producing

Marketing

Assess Customer needs

Selling & Promoting …Competitiveness?

OM in the news

•Productivity•Quality•E-business•Global Competition•Customer Service


Value-Added Process

1-4Value-added = Value or price of outputs – Cost of inputs


Value-Added Process

1-5

The operations function involves the conversion of inputs into outputs

Inputs * Land * Labor* Capital

Transformation/Conversion

process

Outputs Goods

Services

Control(Measurement)

Feedback

Feedback

Feedback

Value added


Food Processor

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Inputs Processing Outputs

Raw VegetablesMetal SheetsWaterEnergyLaborBuildingEquipment

CleaningMaking cansCuttingCookingPackingLabeling

Canned vegetablesScraps!

Inputs Processing Outputs

Doctors, nursesHospitalMedical SuppliesEquipmentLaboratories

ExaminationSurgeryMonitoringMedicationTherapy

Healthy patients

Hospital Process


Products/Goods-service Continuum

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Automobile assembly, steel making

Home remodeling, retail sales

Automobile Repair, fast food

Computer repair, restaurant meal

Song writing, software development

Goods Service

Surgery, teaching

Grameen Cell phone

Product/Service?

Tangible Act

Product packages = Good(s) + service(s)Make a company more competitive- more value to customers


Goods Production & Service DeliveryProduction of goods

Tangible output Production oriented

Delivery of services An act

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Service job categories

• Government• Wholesale/retail• Financial services• Healthcare• Personal services• Business services• Education

Yet operations are similar!


Goods vs Service- Key differencesCharacteristic Goods Service

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 problems High Low

Inventory Much Little

Evaluation Easier Difficult

Patentable Usually Not usual

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Example!


Scope of Operations ManagementForecastingCapacity planningSchedulingManaging inventoriesAssuring qualityMotivating & Training employeesDeciding where to locate facilitiesSupply chain management

And more . . .

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Example!


Decline in Manufacturing Jobs in US! Increase of Service JobsProductivity

Increasing productivity allows companies to maintain or increase their output using fewer workers

Outsourcing Some manufacturing work has been

outsourced to more productive companies

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Bangladesh!


Manufacturing Matters

More than half of the total R&D performed is in the manufacturing industriesWhen a California manufacturing job is lost, an average of 2.5 service jobs are lostAccounts for most exports

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What aboutOutsourcing


Managing Services is Challenging

Service jobs are often less structured than manufacturing jobsCustomer contact is higherServices hire many low-skill, entry-level workers

Employee turnover is higherInput variability is higherService performance can be affected by worker’s personal factors

1-13


Business Operations Overlap

1-14

Operations

FinanceMarketing

The operations function involves the conversion of inputs into outputs


Operations interfaces with supporting functions

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Public Relations

Accounting

Production

Operations

Marketing

Personnel

Purchasing

Distribution

MIS

Legal

Lead time


OM- Planning and Decision Making

Key Decisions of Op. Managers

• What resources/amounts• When needed/scheduled/ordered• Where work-location• How Designed/Done• Who worker

Alternatives & Impact on

• Cost• Profit• Goal• Mission, Vision ….

1-16


Decision Making … (Level)

System Design

• Capacity• Location• Arrangement of departments• Product and service planning• Acquisition and placement of

equipment

1-17

System operation

• Personnel• Inventory• Scheduling• Project Management• Quality Assurance


How to make decisions

Models

Quantitative approaches

Analysis of trade-offs

Establishing

prioritiesEthics Systems

approach

18Different approaches to make informed decision.


ModelsAn abstraction of reality.A simplified version (typically)

Physical ~ Crash test Schematic ~ Blueprints Mathematical ~ Statistical

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Tradeoffs

Models are not perfectPros and cons of models

Adeyl Khan, Faculty, BBA, NSU1-20

Advantages•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

Limitations •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


Quantitative ApproachesLinear programmingQueuing TechniquesInventory modelsProject modelsStatistical models

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Vs.Qualitative Approache

s


Analysis of Trade-Offs

Decision on the amount of inventory to stock

1-22

Customer Cost


Establishing prioritiesPareto PhenomenonA few factors account for a high percentage

of the occurrence of some event(s). The 80/20 Rule

80% of problems are caused by 20% of the activities.

1-23

How do we identify the vital few?


Systems Approach- “The whole is greater than the sum of the parts.”

1-24

Suboptimization


Ethical Issues

Consider how a decision will affect Shareholders ~ Financial statements Management Employees ~ Worker safety, Hiring/firing workers, Worker’s rights Customer ~ Quality, Product safety Community ~ Closing facilities Environment ~ Product safety

1-25


Historical Evolution of Operations ManagementIndustrial revolution (1770’s)

End of craft production Introduction of Machine Power

Scientific management (1911) & Ford Model T Mass production Interchangeable parts Division of labor

Human relations movement (1920-60)~ Hawthorne

Decision models (1915, 1960-70’s)~ IM Models, SPC

Influence of Japanese manufacturers (After WWII) Quality revolution

1-26


Current trends in Business

Major Trends

• The Internet, e-commerce, e-business

• Management technology• Globalization• Management of supply

chains• Outsourcing

1-27

Other Trends

• Ethical behavior• Operations strategy• Working with fewer resources• Revenue management• Process analysis and improvement• Increased regulation and product

liability• Lean production• Agility

Adeyl Khan, Faculty, BBA, NSU1-28

Management Technology

Technology: The application of scientific discoveries to the development and improvement of goods and servicesProduct and service technologyProcess technologyInformation technology


Supply Chain

1-29

Supply Chain: A sequence of activitiesAnd organizations involved in producingAnd delivering a good or service

Suppliers’ Suppliers

Direct Suppliers

Producer DistributorFinal

Consumer


A Supply Chain for Bread

30


A Supply Chain for Bread

1-31

Stage of Production Value Added

Value of Product

Farmer produces and harvests wheat

$0.15 $0.15

Wheat transported to mill $0.08 $0.23

Mill produces flour $0.15 $0.38

Flour transported to baker $0.08 $0.46

Baker produces bread $0.54 $1.00

Bread transported to grocery store

$0.08 $1.08

Grocery store displays and sells bread

$0.21 $1.29

Total Value-Added $1.29

Adeyl Khan, Faculty, BBA, NSU32


Learning Objectives

Define the term operations managementIdentify the three major functional areas of organizations and describe how they interrelateCompare and contrast service and manufacturing operationsDescribe the operations function and the nature of the operations manager’s job

1-33


Learning Objectives

Differentiate between design and operation of production systemsDescribe the key aspects of operations management decision makingBriefly describe the historical evolution of operations managementIdentify current trends that impact operations management

1-34

adeyl khan, faculty, bba, nsu agora vs/ meena bazaar vs. pqs boeing missed production deadline …...

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