1

AN OVERVIEWAN OVERVIEW

2

IntroductionIntroductionIntroductionIntroduction

Operations management is the management of an organization’s productive resources or its production system.

A production system takes inputs and converts them into outputs.

The conversion process is the predominant activity of a production system.

The primary concern of an operations manager is the activities of the conversion process.

3

The Operations FunctionThe Operations FunctionThe Operations FunctionThe Operations Function

MarketingMarketing

MISMISEngineeringEngineering

HRMHRM

QAQA

AccountingAccounting

SalesSalesFinanceFinance

OMOM

4

5

Primary Topics in Operations ManagementPrimary Topics in Operations ManagementPrimary Topics in Operations ManagementPrimary Topics in Operations Management

6

Primary Topics in Operations Management Primary Topics in Operations Management (cont.)(cont.)

Primary Topics in Operations Management Primary Topics in Operations Management (cont.)(cont.)

7

Historical Events in Operations Historical Events in Operations ManagementManagement

Historical Events in Operations Historical Events in Operations ManagementManagement

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776 Adam Smith

Interchangeable parts 1790 Eli Whitney

Scientific Management

Principles of scientific

management1911 Frederick W. Taylor

Time and motion studies 1911Frank and Lillian Gilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford

8

Historical Events in Operations Management Historical Events in Operations Management (cont.)(cont.)

Historical Events in Operations Management Historical Events in Operations Management (cont.)(cont.)

Era Events/Concepts Dates Originator

Human Relations

Hawthorne studies 1930 Elton Mayo

Motivation theories

1940s Abraham Maslow

1950s Frederick Herzberg

1960s Douglas McGregor

Operations Research

Linear programming 1947 George Dantzig

Digital computer 1951 Remington Rand

Simulation, waiting

line theory, decision

theory, PERT/CPM

1950sOperations research groups

MRP, EDI, EFT, CIM1960s, 1970s

Joseph Orlicky, IBM

and others

9

Historical Events in Operations Historical Events in Operations Management Management (cont.)(cont.)

Historical Events in Operations Historical Events in Operations Management Management (cont.)(cont.)

Era Events/Concepts Dates Originator

Quality

Revolution

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)

TQM (total quality

management)1980s

W. Edwards Deming,

Joseph Juran

Strategy and

operations1990s

Wickham Skinner,

Robert Hayes

Business process

reengineering1990s

Michael Hammer,

James Champy

10

Historical Events in Operations Historical Events in Operations Management Management (cont.)(cont.)

Historical Events in Operations Historical Events in Operations Management Management (cont.)(cont.)

Era Events/Concepts Dates OriginatorGlobalization WTO, European Union,

and other trade agreements

1990s

2000s

Numerous countries

and companies

Internet Revolution

Internet, WWW, ERP, supply chain management

1990s ARPANET, Tim

Berners-Lee SAP,

i2 Technologies,

ORACLE,

PeopleSoft

E-commerce 2000s Amazon, Yahoo,

eBay, and others

11

Today's Factors Affecting OMToday's Factors Affecting OMToday's Factors Affecting OMToday's Factors Affecting OM

Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues

12

Operations as a SystemOperations as a SystemOperations as a SystemOperations as a System

InputsInputsInputsInputs OutputsOutputsOutputsOutputsConversionConversionSubsystemSubsystemConversionConversionSubsystemSubsystem

Production SystemProduction System

ControlControlSubsystemSubsystem

ControlControlSubsystemSubsystem

13

Inputs of an Operations SystemInputs of an Operations SystemInputs of an Operations SystemInputs of an Operations System

External Legal, Economic, Social, Technological

Market Competition, Customer Desires, Product Info.

Primary Resources Materials, Personnel, Capital, Utilities

14

Conversion SubsystemConversion SubsystemConversion SubsystemConversion Subsystem

Physical (Manufacturing) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services

15

Outputs of an Operations SystemOutputs of an Operations SystemOutputs of an Operations SystemOutputs of an Operations System

Direct Products Services

Indirect Waste Pollution Technological Advances

16

Production as an Organization FunctionProduction as an Organization FunctionProduction as an Organization FunctionProduction as an Organization Function

Companies cannot compete with marketing, finance, accounting, and engineering alone.

We focus on OM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside.

To succeed, a firm must have a strong operations function teaming with the other organization functions.

17

Decision Making in OMDecision Making in OMDecision Making in OMDecision Making in OM

Strategic Decisions Operating Decisions Control Decisions

18

Strategic DecisionsStrategic DecisionsStrategic DecisionsStrategic Decisions

These decisions are of strategic importance and have long-term significance for the organization.

Examples include deciding: the design for a new product’s production process where to locate a new factory whether to launch a new-product development plan

19

Operating DecisionsOperating DecisionsOperating DecisionsOperating Decisions

These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.

Examples include deciding: how much finished-goods inventory to carry the amount of overtime to use next week the details for purchasing raw material next month

20

Control DecisionsControl DecisionsControl DecisionsControl Decisions

These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance.

Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria

21

What Controls the Operations System?What Controls the Operations System?What Controls the Operations System?What Controls the Operations System?

Information about the outputs, the conversions, and the inputs is fed back to management.

This information is matched with management’s expectations

When there is a difference, management must take corrective action to maintain control of the system