BA 351BA 351ManagingManagingOrganizationsOrganizations

Operations Management

1

What is Operations What is Operations Management?Management?

Operations management is the process an organization uses to:Obtain the materials or ideas for the

product it provides.Transform the materials or ideas into

the product.Provide the final product to a user.

Operations management is closely linked to:Strategic Management (Chapter 7)Planning (Chapter 5)Information Systems Management

(Chapter 18)

2

True or False

Just-in-time and process reengineering are methods of measuring quality.

3

Digital DomainDigital Domain

4

The Operations The Operations Management ProcessManagement Process

Inputs Conversion

Outputs

Raw materials

Labor

Energy

Knowledge

Facility

Capacity

Process

Control

Goods

Services

Information

5

The Operations Management The Operations Management ProcessProcess (cont)(cont)

Three stages:

1. Acquiring inputs (the materials or ideas)

2. Controlling the conversion processes (transforming the materials or ideas into the organization’s products)

3. Delivering the output (providing the organization’s product to the user)

6

Planning in Operations Planning in Operations ManagementManagement

Planning is the foundation of operations management

Planning – the management function that assesses the management environment to set future objectives and map out activities necessary to achieve those objectives.

7

Strategic PlanningStrategic Planning

Strategic management decisions involved in operations management:Make-buy analysis: whether to produce an item

or to purchase it.Capacity: firm’s ability to produce the product

during a given period.Facilities: design and location of an operations

facility.Process: how a product or a service will be

produced.Facilities layout design: physical arrangement

that allows for efficient production

8

Acquiring InputsAcquiring InputsInputs are the supplies needed to create a

product.

Materials requirements planning: analyzing a design to determine the materials and parts required in the production process.

Inventory: the stock of raw materials, inputs, and component parts that the firm keeps on hand.Reordering systems: the process used to help keep inventory levels more or less consistent.Fixed point reordering systemFixed interval reordering system

9

The Conversion ProcessThe Conversion ProcessConversion process: the stage in which the

product’s inputs are converted to the final product.

An effective conversion process:Works to lower the cost of creating the product; or to

Create a better product for the same cost.

Key decision areas:Designing the processMonitoring the process

10

Designing the ProcessDesigning the Process

Process design begins with analyzing the general operation and identifying:Every major step. The order that the steps must take.The flow of the steps from start to finish (including their relationship to each other).

The amount of time each individual step requires.

11

Example of Process Analysis Example of Process Analysis InformationInformation

1 weekFollowing F6G. Test equipment

1 weekFollowing B, E5F. Install equipment

1 weekFollowing C4E. Install floors

1 weekFollowing C3D. Install electrical fixtures

2 weeksNone2C. Paint interior

1 weekNone1B. Order equipment

4 weeksNone1A. Get permit

TimeRelation to Other Steps OrderStep

Process Design ToolsProcess Design Tools

Gantt Charts: provide a visual sequence of the process steps.

Load Charts: type of Gantt chart based on departments or specific resources that are used in the process.

Program Evaluation and Review Technique (PERT) Network: tool for analyzing the conversion process.

13

Example of a Gantt ChartExample of a Gantt Chart

-----------Test equipment -----------Install baking equipment ------------Install floors ------------Install electrical fixtures-----------------------------Paint interior-------------------Order baking equipment----------------------------------------------------Get permitStart 1 2 3 4 5

WEEKS

Example of a Load ChartExample of a Load Chart

------------Carpenter ----------------------------------Electrician-----------------------------Painter-------------------Order department-------------------Office StaffStart 1 2 3 4 5

WEEKS

Facilities LayoutFacilities Layout

Facilities layout - the grouping and organization of equipment and employees Product layout - where each function is performed in a fixed sequence

Process layout - where each work station is relatively self-contained

Fixed position layout - where remote work stations assemble components, and they are then brought to a final assembly area

16

Process Monitoring ToolsProcess Monitoring Tools

Statistical Process Control

Acceptance Sampling

Total Factor Productivity

Partial Productivity

17

Statistical Process Control ToolsStatistical Process Control Tools

Check Sheets Pareto Analysis

Process Flow Analysis

Cause-and-Effect

Diagrams

Process Capability MeasuresControl

Charts 18

Managing QualityManaging QualityTop management must make improvement

in productivity a strategic objective of the firm.

Top management must also be sure that managers from different areas of the firm work together to increase efficiency.

A more efficient production process lowers production costs, increases profitability, may lead to lower prices, and attract new customers.

W. Edwards Deming considered the father of quality management

19

Managing QualityManaging Quality (cont)(cont)

The Quality Management ApproachTotal Quality Management (TQM)

Kaizen (Continuous Improvement) and Efficiency

Just-in-Time Systems

Process Engineering20

Total Quality Total Quality Management (TQM)Management (TQM)

Continuous improvement of the production sequence should be one of the main objectives of operations management.

Total Quality Management (TQM) – based on the belief that all of an organization’s activities need to be focused on improving its product.

Four interrelated steps to quality:PlanDoCheckAct

21

Total Quality Total Quality Management (TQM)Management (TQM) (continued) (continued)

Management and TQMCorrect variances in operations

management by using TQM principles to find and correct their source.

Employees and TQMOperations managers must be sure their

employees understand what TQM means and that each worker is responsible for improving quality.

Managers must also be willing to act on any suggestions or problems that employees identify.

Quality circles.22

Total QualityTotal QualityManagement (TQM)Management (TQM) (continued) (continued)

Customers and TQMOperations management can focus on improving the quality gap – the difference between what customers want and what they actually get from the company.

Suppliers and TQMSuppliers are seen as partners with the firm.

TQM and the Production ProcessOperations management uses TQM techniques to focus on, and improve the production process.

23

Kaizen (Continuous Kaizen (Continuous Improvement) and EfficiencyImprovement) and EfficiencyThe Japanese process of continuous

improvement in the organization’s production system from numerous small, incremental improvements in production processes.

One of the main principles of kaizen is reducing waste in materials, inventory, production steps, and activities that do not add value.

Three steps:MaintenanceKaizenInnovation 24

Just-in-Time (JIT) SystemsJust-in-Time (JIT) Systems

Just-in-time (JIT) – the concept behind creating the firm’s product in the least amount of time.

Close coordination between manufacturers, suppliers, and customers.

The firm’s inventory of inputs are kept at the lowest level possible.

Inputs arrive at the organization when, not before, they are needed. 25

Process ReengineeringProcess Reengineering

Method of changing the entire production process rather than making incremental changes.

The firm (including its operations management) is viewed as a complete process.

Involves fundamentally rethinking and radically redesigning the entire process including:Cutting out steps that are not needed.Reducing paperwork. 26

FinalFinal

Thursday, June 10th @ 6pm

27