fundamentals of operations management bus 3 – 140 mr. jess marino fall, 2007

Fundamentals ofOperations Management

BUS 3 – 140

Mr. Jess MarinoFall, 2007

2

Agenda

– Introduction

– Green Sheet review and other administrative items

– Additional comments on the course

– Initial Lecture

Introduction

4

Marino Background

Academics

Supply Chain Experience

– Graduate in Production and Operations Management

– Product of CSU system (San Diego State)

– Developed and presented several courses as a Management Consultant

– Over 25 years as a practitioner at all levels of responsibility Leadership in small and large organizations Many different hourly and professional jobs Over eight years as a Management Consultant

– Certified in Production and Operations Management by the Association for Operations Management (APICS)

– Exposure to many industries and organizations

– Have done business in 13 countries throughout the world

5

Positions Held

MachineOperator

ProductionExpediter

Mail RoomClerk

WarehouseClerk

ProductionSupervisor

BuyerProductionController

MaterialController

StockroomManager

Production ControlManager

Director of Materials

Executive Directorof Fulfillment

Director of Supply Chain Management

Director of Operations

6

Have conducted Business in 13 Countries, Worldwide

UNITED STATES

CANADA

MEXICO

ENGLAND

SCOTLAND

FRANCE

HOLLAND

HONG KONG

CHINA

TAIWAN

SINGAPOREMALAYSIA

THAILAND

Green Sheet Review

8

Student Information Sheet

NAME

MAJOR (and Emphasis)

CURRENT JOB (Company Optional)

PREVIOUS SUPPLY CHAIN JOBS / EXPEIRIENCE

OTHER

9

Course Overview and Objectives

– Understanding how the Operations function interrelates with other functional organizations in a business

– Understanding how an organization uses its resources, processes, data, and technologies to create goods and provide services to customers

– Understanding how operational effectiveness can be a critical success factor in determining an organization’s Revenue, Profitability, and Shareholder return

– Understanding the managerial responsibility for Operations, even when production is outsourced, or done in regions far from corporate headquarters

10

Student Learning Objectives for the Course

– Understand how Operations is relevant to all functions of a business

– Understand Operations Management and how it fits within the overall organization strategy, objectives, and competitiveness

– Develop an interest in Operations and apply that understanding, whether in a manufacturing or service career

Course Introduction

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Operations is a Key Element of a Supply Chain

Revenue

Utilization of Assets

(People, Plant, Equip)

Cash

Inventory

BALANCING keeping Customers completely satisfied and Resourcesoptimally utilized ……. against spending the least amount of Cash

and carrying the least amount of Inventory

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Scope of this Course

CustomerDemand

ProductionScheduling

MaterialsMgmt

Production ShippingCustomerService

• Forecasting

• Aggregate Planning

• Strategic Capacity Planning

• Demand & Supply Matching

• Scheduling

• Just In Time (JIT)

• Project Mgmt

• Inventory Mgmt

• MRP

• ERP

• Process Layout

• Work System Design

• Lean Operations

• Quality

Introduction toOperations Management

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Highest Level Operations Management Process (Fig 1.2)

There is a CONVERSION that takes Information, Intelligence, Resources, and Activities and turns them into something

VALUABLE to Customers and / or Society

InputsProcess

(Transformation)Outputs

ControlFeedback

Feedback

Feedback

* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin

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Inputs / Process / Outputs (Table 1.1)

Land Processes High GOODS percentageHuman Cutting, drilling Houses

Physical Labor Transporting AutomobilesIntellectual Labor Teaching Clothing

Capital Farming ComputersRaw Materials Mixing Machines

Energy Packing TelevisionsWater Copying, faxing Food productsMetals TextbooksWood CD players

Equipment High SERVICE percentageMachines Health careComputers EntertainmentTrucks Car RepairTools Delivery

Facilities LegalHospitals bankingFactories CommunicationRetail Stores Other

Other InnovationInformationTimeLegal ConstraintsGov't Regulations

Inputs Transformation Outputs


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Operations are managed for both Production and Services

Inputs Process Outputs

• Raw vegetables• Metal sheets• Water• Energy• Labor• Building• Equipment

• Cleaning• Making cans• Cutting• Cooking• Packing• Labeling

Canned Vegetables

PR

OD

UC

TIO

N

Inputs Process Outputs

• Doctors, nurses• Hospital• Medical supplies• Equipment• Laboratories

• Examination• Surgery• Monitoring• Medication• Therapy

SE

RV

ICE

Treated Patients

Fo

od

pro

cess

ing

Pla

nt

Ho

spit

al

Result is

TANGIBLE OUTPUT

Result implies

an ACT

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Differences between Goods and Service (Book Table 1.3)

Characteristic Goods Services

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 quality problenms before delivery to customer

High Low

Inventory Much Little

Evaluation Easier More difficult

Patentable Usually Not usually


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Goods and Services continuum (Fig 1.3)

Songwriting, software development

Surgery, teaching

Goods Service

Automobile assembly , steelmaking

Home remodeling, retail sales

Automobile repair, fast food

Computer repair, restaurant meal


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Combination of Production and Service


Stage of Production Value Added

Value of

ProductFarmer 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

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Manufacturing Jobs

U.S. Manufacturing vs. Service Employment

010

2030

4050

6070

8090

45 50 55 60 65 70 75 80 85 90 95 00 02 05Year

Per

cen

t

Mfg.Service

> 70%

• Greater PRODUCTIVITY allows for increased output with fewer workers• Many manufacturing jobs have moved OFFSHORE to lower labor cost areas


How Operations Interacts with Other Organizations

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Key intersections with Sales & Marketing and with Finance

FINANCE & ACCOUNTING

– Budgeting

– Authorizing Capital spending

– Authorizing major inventory buys

– Cost accounting

– Make vs. Buy decisions

– Location planning

– Managing international trade

– Analyzing trade-off decisions

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Key intersections with Sales & Marketing and with Finance

SALES & MARKETING

– Forecasting Demand

– Influencing demand

– Committing supply

– Negotiating schedules with customers

– Providing competitive information

– Requesting new products and services

– Opening new markets

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Interaction with other Functional Organizations

Organization Key Interaction

IT ERP Application Support

Transaction Timing and accuracy

Reporting

Decision-support tools

Human Resources Training

Recruiting

Management development

Regulatory compliance

Legal Contract administration

Supplier relations

Offshoring

Competitiveness, Strategy,and Productivity

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Strategy Terms

Mission

• The reason for existence for an organization

Mission Statement

• States the purpose of an organization

Goals

• Provide detail and scope of mission

Strategies

• Plans for achieving organizational goals

Tactics

• The methods and actions taken to accomplish strategies


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How terms have meaning to the business

Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures


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Competitiveness

World Class Operations enable companies to gain aCOMPETITVE ADVANTAGE over others trying to servethe same customers and markets

The three biggest levers are:

• Cost

• Quality and Reliability

• Assurance of Supply

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How Operations impacts Competitiveness

– Cost

– Quality

– Product design

– Response Time

– Flexibility

– Scalability

– Service

– Location

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Factors that impact Operations Strategy

Factor Operations Strategy Examples of Companies or Services

High-performance design and/or high quality

Sony TV, Lexus, Disneyland

Consistent quality and reliability Coca-Cola, Pepsi, Kodak, Xerox, Motorola, PG&E

Rapid delivery McDonald's, FedEx, UPS

On-Time delivery Dominos Pizza, FedEx, Express Mail

Variety Burger King, Hospital emergency room

Volume McDonald's, Toyota, Supermarkets

Service Superior Customer Service Disneyland, HP, IBM, Nordstrom

Location Convenience Supermarkets, dry cleaners, Banks, 7-11, Gas Stations

Wal-Mart, Southwest Airlines

Flexibility

Price Low Cost

Quality

Time

The strategy is tied to where a COMPETITIVE EDGEcan be gained or maintained

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Operations Strategies vary by mission of the Business (2.4)

What the Decisions Affect

1 Product and Service design Costs, quality, liability, and environmental issues

2 Capacity Cost structure, flexibility

3 Process selection and layout Costs, flexibility, skill level needed, capacity

4 Work design Quality of work life, employee safety, productivity

5 Location Costs, visibility

6 Quality Ability to meet or exceed customer expectations

7 Inventory Costs, shortages

8 Maintenance Costs, equipment reliability, productivity

9 Scheduling Flexibility, efficiency

10 Supply chains Costs, quality, agility, shortages, vendor relations

11 Projects Costs, new projects, services, or operating systems

Decision Area


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Operations Strategies can also vary by Industry

QUALITY QUANTITY DELIVERY SERVICE PRICE

Relative weight and importance can vary. For some Items andIndustries, it can be primarily Price; for others Delivery, etc




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Productivity

Productivity is a RATIO of Inputs and Outputs

Productivity =Output

Input

Inputs and Outputs can be measured at different degrees

Output Output Output OutputLabor Machine Capital Energy

Goods or services producedAll inputs used to produce them

Partial Measures

Multifactor Measures

Total Measure

OutputLabor + Machine

OutputLabor + Capital + Energy

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Additional Productivity Terms

Performance to a Standard (e.g. Time to assemble a Computer,PO’s placed per hour, etc.) Emphasis is Value-Added activities

Efficiency

Per cent of time that is devoted to Value-Added activities

Utilization

Efficiency * Utilization

Productivity

The Contribution that the activity / departmentprovides to the overall mission of the business

Effectiveness

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Steps for Improving Productivity

– Measure key outputs and indicators

– Analyze the production system as a whole

– Benchmark Best In Class processes within and across industries

– Solicit ideas from everyone in the organization

– Set achievable, stretch goals

– Ensure executive supporrt

– Measure the improvements

– Publicize the improvements

fundamentals of operations management bus 3 – 140 mr. jess marino fall, 2007

Documents

inventory slide

course introduction

world slide

operations function

service career slide

green sheet review slide

course initial lecture

management consultant