Chapter 1Introduction

The 3 Dimensions of Operations

The Realm of Operations

The Operations Function

Marketing Operations Finance

-Creating Demand -Production of goods -Acquisition and

-Generating Sales & services, 80% of allocation of

both physical & capital

human resources

Manufacturing Service

Tangible Act

Production of goods – tangible output

Delivery of services – an act

Goods vs vs Service

Steel productionAutomobile fabrication

Home remodelingRetail sales

Auto RepairAppliance repair

Maid ServiceManual car wash

TeachingLawn mowing

High percentage goodsLow percentage service

Low percentage goodsHigh percentage service

Manufacturing vs ServiceManufacturing vs Service

Characteristic Manufacturing Service

Output

Customer contact

Uniformity of input

Labor content

Uniformity of output

Measurement of productivity

Opportunity to correct

Tangible

Low

High

Low

High

Easy

High

Intangible

High

Low

High

Low

Difficult

Lowquality problems

An Operation As A Productive System

Transformation (Conversion) Process

Goods or Services

Inputs Outputs Energy

Materials

Labor

Capital

Information

Feedback information for control of process inputs and process technology

What is Operations Mgmt.?

Creation and Distribution of Goods and Services

Procurement of Required Materials

What is Operations Mgmt.?

The Traditional Model OM transforms factors of production into

goods or services of higher value The Business Process Model of the

Firm OM is involved in doing or supporting the four core sets of business processes

Determining customer needs Developing product strategy (product innovation) Managing the entire supply chain Managing non-value adding support activities

Implications of the Business Process Perspective

Operations Managers Must Maintain a Cross-functional perspective Concern about pleasing the customer is

paramount A resource balancing act: things, humans

and information The Operations Manager must wear many

hats Profit = MS1 x MS2 x MS3

= market size x market share x margin on sales

where margin on sales = price – cost

Managing the Operations Subsystem Functions of the operations manager:

Planning Product Planning Facilities Design

Organizing Determines the activities required to achieve the

operations subsystem’s goals. Assign authority for carrying them out.

Controlling Measure the outputs to see if theyconform to

what has been planned.

Functions of the operations manager

Planning & Organizing Inputs

-Management

-Labor

-Capital

-Land

Planning & Organizing

The Conversion

Process

Outputs

-Goods

-Services

Feedback to enhance control

General Model for Production/Operations Management

Conversion Process

Inputs Outputs

Random Fluctuations

ControllingControlling the Conversion System

-Controlling Operations-Inventory Control-Quality Control

Feedback

PlanningPlanning the Conversion

System-Strategies & Plans for

Operations-Forecasting

-Capacity Planning-Facility Location

-Layout

OrganizingOrganizing for

Conversion-Organizing & Staffing

for Operations-Job design, work

measure, operationsstandards

Monitor

Tactical & Strategic Decisions

Operations Management Decisions

Work Force

Quality

Process

Capacity

Inve

ntor

y

Job

Design

Work Measure

Managing Work ForceP

lanning Quality

Quality C

ontrol

-Process Selection

-Choice of T

ech.

-

Layout

Facilities Decision

Sched. Oper.

Proj. Sched.

Inde

p. D

eman

dM

ater

ials

Req

uire

men

t

P

lann

ing

Criteria for Operations Decisions

Cost Quality

Concerned with the quality of product or service produced by operations

Dependability May be measured by:

Percentage of stockout Percentage of delivery promises met

Criteria for Operations Decisions

Flexibility Involves the ability of operations to

make changes in product design or in the volume of product delivery

Strategy Operations Management

Evolution of Strategy Know thy enemy/Know the customer

Forces impacting strategy Information technology/e-commerce Increase customer participation/demands Market growth opportunities may be limited

Your markets might be maturing Geographic expansion opportunities may be limited

Two Basic Approaches Focus on your core competencies (stick to your knitting) Demand innovation—investigate your customers’ total

needs and expand your product offering scope

POM: An Evolutionary PerspectiveDivision of Labor Massive data StorageTime Study Analysis & OptimizationStandards, Planning & Clerical DutiesControl

Tomorrow

The Continual Evolution of POM Practice

Quantitative Tech. Dominance of Service SystemLP Govt. RegulationsPERT & CPM Consumers' demand on P.O.M.

Automation, Robotry, & Computerized ControlInternational Scope of Productive SystemsForeign Imports in U.S. Markets

ScientificManageme

nt

Computers

OperationsResearch

Today'sDevelopment

1875-1925

1955 -Present

1940-Presen

t

CommonMarket

MoslemWorld

EasternBlock

Remants

U.S.A.

China

Japan/Korea

A More Complicated World

Other Southern Hemisphere States

CA.

The Impact of Pace Dimensions of Pace

Rate of new product introductions Rate of new process technology

introductions Rate of new players—often global,

introductions Consequences thereof on:

Organization structure Strategic processes Manufacturing processes

Future Challenges

To the OM function Scarcity of worthwhile human resources Deflation, inflation and/or currency

fluctuations A wired supply chain (is B2B still valid?) Increased customer involvement New product/process technologies The Intellectual Property Challenge Globalism

China / Japan / Europe / Mexico /So-called 3rd world