chapter-1 introduction of pom
TRANSCRIPT
Production Operations Production Operations Management Management
: An Overview: An Overview
Learning Objectives of this Paper
Gain an appreciation of strategic importance of operations in a global business environment
Understand how operations relates to other business functions
Develop a working knowledge of concepts and methods related to designing and managing operations
Develop a skill set for quality and process improvement
Lecture outlineLecture outline
DefinitionHistorical Milestones in POMFactors Affecting POM TodayDifferent Ways of Studying POMWrap-Up: What World-Class Producers Do
What Is Production Operations Management?
Production is the creation of goods and services
Operations management is the set of activities that creates goods and services by transforming inputs into outputs
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Production Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more . . .
Scope of Production Operations Scope of Production Operations ManagementManagement
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Production Operations ManagementProduction Operations Management
The management of systems or processes that create goods and/or provide services
Organization
Finance Operations Marketing
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Business Operations OverlapBusiness Operations Overlap
Operations
FinanceMarketing
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POM in the Organization Chart
OperationsOperations
Plant Manager
Plant Manager
OperationsManager
OperationsManager
DirectorDirector
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Finance Marketing
How is Operations Relevant to my Major?
Accounting
Information Technology
Management
““As an auditor you must understand the fundamentals of operations management.”
“IT is a tool, and there’s no better place to apply it than in operations.”
“We use so many things you learn in an operations class—scheduling, lean production, theory of constraints, and tons of quality tools.”
How is Operations Relevant to my Major?
Economics
Marketing
Finance
““It’s all about processes. I It’s all about processes. I live by flowcharts and Pareto live by flowcharts and Pareto analysis.”analysis.”
““How can you do a good job How can you do a good job marketing a product if you’re marketing a product if you’re unsure of its quality or unsure of its quality or delivery status?”delivery status?”
““Most of our capital Most of our capital budgeting requests are from budgeting requests are from operations, and most of our operations, and most of our cost savings, too.”cost savings, too.”
What Do Operations Managers Do?
What is operations?a function or system that transforms inputs into outputs of greater value
What is a transformation process?a series of activities along a value chain extending from supplier to
customeractivities that do not add value are superfluous and should be eliminated
What is operations management?design, operation, and improvement of productive systems
What Operations Managers Do
PlanOrganize StaffLeadControl
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Why Study Production Operation Management?
Business Education
Systematic Approach to Org. Processes
Career Opportunities
Cross-Functional Applications
POM
Historical Milestones in POM
The Industrial RevolutionPost-Civil War PeriodScientific ManagementHuman Relations and BehaviorismOperations ResearchThe Service Revolution
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The Industrial Revolution
The industrial revolution developed in England in the 1700s.
The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories.
Adam Smith’s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor.
Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.
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The Industrial Revolution
The industrial revolution spread from England to other European countries and to the United Sates.
In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.
The first great industry in the U.S. was the textile industry.
In the 1800s the development of the gasoline engine and electricity further advanced the revolution.
By the mid-1800s, the old cottage system of production had been replaced by the factory system.
. . . more
Eli Whitney
Born 1765; died 1825
In 1798, received government contract to make 10,000 muskets
Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket
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Post-Civil War Period
During the post-Civil War period great expansion of production capacity occurred.
By post-Civil War the following developments set the stage for the great production explosion of the 20th century: increased capital and production capacity the expanded urban workforce new Western U.S. markets an effective national transportation system
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Scientific Management
Frederick Taylor is known as the father of scientific management. His shop system employed these steps: Each worker’s skill, strength, and learning ability were
determined. Stopwatch studies were conducted to precisely set
standard output per worker on each task. Material specifications, work methods, and routing
sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated.
. . . more
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Scientific Management
In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific management: standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts
Frederick W. Taylor
Born 1856; died 1915
Known as ‘father of scientific management’
In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first time & motion studies
Created efficiency principles
Taylor: Management Should Take More Responsibility for
Matching employees to right jobProviding the proper trainingProviding proper work methods and toolsEstablishing legitimate incentives for work to be
accomplished
Frank & Lillian Gilbreth
Frank (1868-1924); Lillian (1878-1972)
Husband-and-wife engineering team
Further developed work measurement methods
Applied efficiency methods to their home & 12 children!
(Book & Movie: “Cheaper by the Dozen,” book: “Bells on Their Toes”
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Henry Ford
Born 1863; died 1947 In 1903, created Ford
Motor Company
In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station
Paid workers very well for 1911 ($5/day!)
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W. Edwards Deming
Born 1900; died 1993 Engineer & physicist Credited with teaching Japan
quality control methods in post-WW2
Used statistics to analyze process
His methods involve workers in decisions
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Dr. Demings 14 Points
• 1. Constancy of purpose
• 2. The new philosophy
• 3. Cease dependence on mass inspection
• 4. End lowest tender contracts
• 5. Improve every process
• 6. Institute training on the job
• 7. Institute leadership
• 8. Drive out fear
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Dr. Demings 14 Points
• 9. Break down barriers
• 10. Eliminate exhortations
• 11. Eliminate arbitrary numerical targets
• 12. Permit pride of workmanship
• 13. Encourage education
• 14. Top management commitment and action
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Human Relationsand Behavioralism
In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production.
Researchers and managers alike were recognizing that psychological and sociological factors affected production.
From the work of behavioralists came a gradual change in the way managers thought about and treated workers.
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Operations Research
During World War II, enormous quantities of resources (personnel, supplies, equipment, …) had to be deployed.
Military operations research (OR) teams were formed to deal with the complexity of the deployment.
After the war, operations researchers found their way back to universities, industry, government, and consulting firms.
OR helps operations managers make decisions when problems are complex and wrong decisions are costly.
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The Service Revolution
The creation of services organizations accelerated sharply after World War II.
Today, more than two-thirds of the U.S. workforce is employed in services.
About two-thirds of U.S. GDP is from services. There is a huge trade surplus in services. Investment per office worker now exceeds the
investment per factory worker. Thus there is a growing need for service operations
management.
Significant Events in POM
Division of labor (Smith, 1776)Standardized parts (Whitney, 1800)Scientific management (Taylor, 1881)Coordinated assembly line (Ford 1913)Gantt charts (Gantt, 1916)Motion study (the Gilbreths, 1922)Quality control (Shewhart, 1924)
Significant Events - Continued
CPM/PERT (Dupont, 1957) MRP (Orlicky, 1960)CADFlexible manufacturing systems (FMS)Manufacturing automation protocol (MAP)Computer integrated manufacturing (CIM)
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Organizational Model
POMPOM
MarketingMarketing
MISMISEngineeringEngineering
HRMHRM
QAQA
AccountingAccounting
SalesSalesFinanceFinance
Operations Function
Operations
Marketing
Finance and accounting
Human resources
Outside suppliers
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Organizational Functions
Marketing Gets customers
Operations creates product or service
Finance/Accounting Obtains funds Tracks money
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Functions - Bank
OperationsFinance/
AccountingMarketing
Check
Clearing
Teller
Scheduling
Transactions
ProcessingSecurity
Commercial Bank
© 1984-1994 T/Maker Co.
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Functions - Airline
OperationsFinance/
AccountingMarketing
Ground
Support
Flight
Operations
Facility
MaintenanceCatering
Airline
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Functions - Manufacturer
OperationsFinance/
AccountingMarketing
Production
ControlManufacturing
Quality
ControlPurchasing
Manufacturing
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Operations Interfaces
Public Relations
Accounting
IndustrialEngineering
Operations
Maintenance
Personnel
Purchasing
Distribution
MIS
Legal
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Where Are the POM Jobs?Technology/methodsFacilities/space utilizationStrategic issuesResponse timePeople/team developmentCustomer serviceQualityCost reduction Inventory reductionProductivity improvement
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New Challenges in POM
Local or national focus
Batch shipments Low bid purchasing
Lengthy product development
Standard products Job specialization
Global focus Just-in-time
Supply chain partnering
Rapid product development, alliances
Mass customization
Empowered employees, teams
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Local or national focus
Reliable worldwide communication and transportation networksGlobal focus, moving production offshore
Batch (large) shipmentsShort product life cycles and cost of capital put pressure on reducing inventory
Just-in-time performance
Low-bid purchasingSupply chain competition requires that suppliers be engaged in a focus on the end customer
Supply chain partners, collaboration, alliances, outsourcing
Past Causes Future
Changing Challenges for the Operations Manager
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Lengthy product development
Shorter life cycles, Internet, rapid international communication, computer-aided design, and international collaboration
Rapid product development, alliances, collaborative designs
Standardized productsAffluence and worldwide markets; increasingly flexible production processes
Mass customization with added emphasis on quality
Job specializationChanging socioculture milieu; increasingly a knowledge and information society
Empowered employees, teams, and lean production
Changing Challenges for the Operations Manager
Past Causes Future
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Low-cost focus
Environmental issues, ISO 14000, increasing disposal costsEnvironmentally sensitive production, green manufacturing, recycled materials, remanufacturing
Ethics not at forefront
Businesses operate more openly; public and global review of ethics; opposition to child labor, bribery, pollution
High ethical standards and social responsibility expected
Changing Challenges for the Operations Manager
Past Causes Future
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Ten Critical Decisions
Service, product design………
Quality management…………..
Process, capacity design…….
Location …………….…………..
Layout design ………………….
Human resources, job design.
Supply-chain management…..
Inventory management ……….
Scheduling ……………………..
Maintenance …………………...
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The Critical Decisions
Quality management Who is responsible for quality? How do we define quality?
Service and product design What product or service should we offer? How should we design these products and services?
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The Critical Decisions - Continued
Process and capacity design What processes will these products require and in
what order? What equipment and technology is necessary for
these processes?
Location Where should we put the facility On what criteria should we base this location
decision?
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The Critical Decisions - Continued
Layout design How should we arrange the facility? How large a facility is required?
Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce?
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The Critical Decisions - Continued
Supply chain management Should we make or buy this item? Who are our good suppliers and how many should we
have?
Inventory, material requirements planning, JIT “just-in-time” inventory, How much inventory of each item should we have? When do we re-order?
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The Critical Decisions - Continued
Intermediate, short term, and project scheduling Is subcontracting production a good idea? Are we better off keeping people on the payroll
during slowdowns?
Maintenance Who is responsible for maintenance?
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Different Ways to Study POM
Production as a System Production as an Organization Function Decision Making in POM
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Production as a System
InputsInputsInputsInputs OutputsOutputsOutputsOutputsConversionConversionSubsystemSubsystemConversionConversionSubsystemSubsystem
Production SystemProduction System
ControlControlSubsystemSubsystem
ControlControlSubsystemSubsystem
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Inputs of a Production System
External Legal, Economic, Social, Technological
Market Competition, Customer Desires, Product Info.
Primary Resources Materials, Personnel, Capital, Utilities
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Outputs of a Production System
Direct Products Services
Indirect Waste Pollution Technological Advances
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Conversion Subsystem
Physical (Manufacturing) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services (Federal, State, Local)
Transformation Process
Physical: Physical: as in manufacturing operationsas in manufacturing operations
Locational: Locational: as in transportation operationsas in transportation operations
Exchange: Exchange: as in retail operationsas in retail operations
Physiological: Physiological: as in health careas in health care
Psychological: Psychological: as in entertainmentas in entertainment
Informational: Informational: as in communicationas in communication
Operations as a Transformation Operations as a Transformation ProcessProcess
INPUT •Material•Machines•Labor•Management•Capital
TRANSFORMATIONPROCESS
OUTPUT •Goods•Services
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Production as an Organization Function
We focus on POM 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.
Processes and OperationsProcesses and Operations
Outputs• Services• Goods
Internal andexternal customers
Information on performance
Processes and operations
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2
3
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Inputs• Workers• Managers• Equipment• Facilities• Materials• Services• Land• Energy
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Responsibilities of Operations ManagementResponsibilities of Operations Management
Products & services
Planning– Capacity– Location–– Make or buy– Layout– Projects– Scheduling
Controlling/Improving– Inventory– Quality
Organizing– Degree of centralization– Process selection
Staffing– Hiring/laying off– Use of Overtime
Directing– Incentive plans– Issuance of work orders– Job assignments
– Costs– Productivity
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Key Decisions of Operations Managers
WhatWhat resources/what amounts WhenNeeded/scheduled/ordered WhereWork to be done HowDesigned WhoTo do the work
Types of POM Decisions
Strategic choices Process Quality Capacity Location Layout Operating Decisions
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Decision Making in POM
Strategic Decisions Operating Decisions Control Decisions
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Characteristics of Goods Tangible product Consistent product
definition Production usually
separate from consumption
Can be inventoried Low customer
interaction
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Characteristics of Service
Intangible product Produced & consumed at same
time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed
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Goods Versus Services
Can be resoldCan be inventoried
Some aspects of quality measurable
Selling is distinct from production
Reselling unusual Difficult to inventory Quality difficult to
measure Selling is part of service
Goods Service
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Goods Versus Services - Continued
Product is transportable
Site of facility important for cost
Often easy to automate
Revenue generated primarily from tangible product
Provider, not product is transportable
Site of facility important for customer contact
Often difficult to automate
Revenue generated primarily from intangible service.
GoodsGoods ServiceService