lec 01 om b 02 09-2015
TRANSCRIPT
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Operations Management
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Operations and Productivity 1
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Learning ObjectivesWhen you complete this chapter you should be able to:
1. Define operations management2. Explain the distinction between
goods and services3. Explain the difference between
production and productivity
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What Is Operations Management?
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Production is the creation of goods and services
Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs
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Organizing to Produce Goods and Services
Essential functions:1. Marketing – generates demand
2. Production/operations – creates the product
3. Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
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Organizational Charts
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Organizational Charts
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Organizational Charts
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The Supply Chain▶A global network of organizations and
activities that supply a firm with goods and services
▶Members of the supply chain collaborate to achieve high levels of customer satisfaction, efficiency and competitive advantage.
Farmer Syrup Bottler Distributor Retailerproducer
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Why Study OM?
1. OM is one of three major functions of any organization, we want to study how people organize themselves for productive enterprise
2. We want (and need) to know how goods and services are produced
3. We want to understand what operations managers do
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Options for Increasing Contribution
TABLE 1.1
MARKETING OPTION
FINANCE /ACCOUNTING
OPTION OM OPTION
CURRENT
INCREASE SALES
REVENUE 50%
REDUCE FINANCE
COSTS 50%
REDUCE PRODUCTION COSTS 20%
Sales $100,000 $150,000 $100,000 $100,000Cost of goods –80,000 –120,000 –80,000 –64,000
Gross margin 20,000 30,000 20,000 36,000
Finance costs –6,000 –6,000 –3,000 –6,000Subtotal 14,000 24,000 17,000 30,000Taxes at 25% –3,500 –6,000 –4,200 –7,500Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500
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What Operations Managers Do
Basic Management Functions
▶Planning▶Organizing▶Staffing▶Leading▶Controlling
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Ten Critical DecisionsTen Decision Areas
1. Design of goods and services2. Managing quality3. Process and capacity 4. Location strategy5. Layout strategy6. Human resources and job design 7. Supply chain management8. Inventory management9. Scheduling10. Maintenance
Table 1.2
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The Strategic Decisions
1. Design of goods and services▶ Defines what is required of operations
▶ Product design determines quality, sustainability and human resources
2. Managing quality▶ Determine the customer’s quality expectations
▶ Establish policies and procedures to identify and achieve that quality
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The Strategic Decisions3. Process and capacity design
▶ How is a good or service produced?▶ Commits management to specific
technology, quality, resources, and investment.
4. Location strategy▶ Nearness to customers, suppliers, and
talent.▶ Considering costs, infrastructure, logistics,
and government.
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The Strategic Decisions5. Layout strategy
▶ Integrate capacity needs, personnel levels, technology, and inventory
▶ Determine the efficient flow of materials, people, and information.
6. Human resources and job design▶ Recruit, motivate, and retain personnel with
the required talent and skills.▶ Integral and expensive part of the total
system design.
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The Strategic Decisions7. Supply-chain management
▶ Integrate supply chain into the firm’s strategy.▶ Determine what is to be purchased, from
whom, and under what conditions.
8. Inventory management▶ Inventory ordering and holding decisions.▶ Optimize considering customer satisfaction,
supplier capability, and production schedules.
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The Strategic Decisions9. Scheduling
▶ Determine and implement intermediate- and short-term schedules.
▶ Utilize personnel and facilities while meeting customer demands.
10. Maintenance▶ Consider facility capacity, production
demands, and personnel.▶ Maintain a reliable and stable process.
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Where are the OM Jobs?▶ Technology/methods▶ Facilities/space utilization▶ Strategic issues▶ Response time▶ People/team development▶ Customer service▶ Quality▶ Cost reduction▶ Inventory reduction▶ Productivity improvement
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Opportunities
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Certifications APICS, the Association for Operations Management
American Society for Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Council of Supply Chain Management Professionals
Charter Institute of Purchasing and Supply (CIPS)
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Significant Events in OM
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The Heritage of OM
▶ Division of labor (Adam Smith 1776; Charles Babbage 1852)
▶ Standardized parts (Whitney 1800)▶ Scientific Management (Taylor 1881)▶ Coordinated assembly line (Ford/ Sorenson 1913)▶ Gantt charts (Gantt 1916)▶ Motion study (Frank and Lillian Gilbreth 1922)▶ Quality control (Shewhart 1924; Deming 1950)
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The Heritage of OM▶ Computer (Atanasoff 1938)▶ CPM/PERT (DuPont 1957, Navy 1958)▶ Material requirements planning (Orlicky 1960)▶ Computer aided design (CAD 1970)▶ Flexible manufacturing system (FMS 1975)▶ Baldrige Quality Awards (1980)▶ Computer integrated manufacturing (1990)▶ Globalization (1992)▶ Internet (1995)
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Goods and ServicesAutomobile
ComputerInstalled carpeting
Fast-food mealRestaurant meal/auto repair
Hospital careAdvertising agency/
investment managementConsulting service/
teachingCounseling
Percent of Product that is a Good Percent of Product that is a Service
100% 75 50 25 0 25 50 75 100%| | | | | | | | |
1 - 27© 2014 Pearson Education, Inc. © 2011 Pearson Education, Inc. publishing as Prentice Hall
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 and
consumed at same time Often unique High customer
interaction Inconsistent product
definition Often knowledge-based Frequently dispersed
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Allocation of GDP by Sector, Turkey, 2010
▶Agriculture 8.8%▶Industry 25.7%▶Services 65.5%
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New Challenges in OM
Global focus Just-in-time Supply-chain partnering Rapid product
development, alliances Mass customization Empowered employees,
teams
ToFrom Local or national focus Batch shipments Low bid purchasing
Lengthy product development
Standard products
Job specialization
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Changing ChallengesTraditional Approach
Reasons for Change
Current Challenge
Ethics and regulations not at the forefront
Public concern over pollution, corruption, child labor, etc.
High ethical and social responsibility; increased legal and professional standards
Local or national focus
Growth of reliable, low cost communication and transportation
Global focus, international collaboration
Lengthy product development
Shorter life cycles; growth of global communication; CAD, Internet
Rapid product development; design collaboration
Figure 1.5
1 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall
Changing ChallengesTraditional Approach
Reasons for Change
Current Challenge
Emphasis on specialized, often manual tasks
Recognition of the employee's total contribution; knowledge society
Empowered employees; enriched jobs
“In-house” production; low-bid purchasing
Rapid technological change; increasing competitive forces
Supply-chain partnering; joint ventures, alliances
Large lot production
Shorter product life cycles; increasing need to reduce inventory
Just-In-Time performance; lean; continuous improvement
Figure 1.5
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Efficiency Versus Effectiveness
▶ The difference between efficient and effective is that efficiency refers to how well you do something, whereas effectiveness refers to how useful it is.
▶ “Efficiency is doing things right; effectiveness is doing the right things.”
▶Doing the Right Things is More Important than Doing Things Right
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The Transformation Process
Inputs• Land• Labor• Capital• Information
Outputs• Goods• Services
Transformation/Conversion
Process
Control
Measurementand Feedback
Measurementand Feedback
Measurementand Feedback
Value-Added
Feedback = measurements taken at various points in the transformation process
Control = The comparison of feedback against previously established standards to determine if corrective action is needed.
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▶ Measure of process improvement▶ Represents output relative to input▶ Only through productivity increases
can our standard of living improve
Productivity
Productivity =Units produced
Input used
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Productivity Variables1. Labor - contributes
about 10% of the annual increase
2. Capital - contributes about 38% of the annual increase
3. Management - contributes about 52% of the annual increase
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Capital
10
8
6
4
2
0
Perc
ent i
ncre
ase
in p
rodu
ctiv
ity
Percentage investment10 15 20 25 30 35
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Management
▶Ensures labor and capital are effectively used to increase productivity▶Use of knowledge▶Application of technologies
▶Knowledge societies▶Difficult challenge
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Productivity and the Service Sector
1. Typically labor intensive2. Frequently focused on unique individual
attributes or desires3. Often an intellectual task performed by
professionals4. Often difficult to mechanize and automate5. Often difficult to evaluate for quality
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New Challenges in OM
▶ Global focus▶ Supply-chain partnering▶ Sustainability▶ Rapid product development▶ Mass customization▶ Just-in-time performance▶ Empowered employees
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Ethics, Social Responsibility, and Sustainability
Challenges facing operations managers:
▶ Develop and produce safe, high-quality green products
▶ Train, retrain, and motivate employees in a safe workplace
▶ Honor stakeholder commitments
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Thank You