1 Operations Management. 2 Chapter 1: Operations Function A general model of the operations functions Operations management activities History of

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Operations Management

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Chapter 1: Operations Function

A general model of the operations functions

Operations management activities History of the Operations function Industrial & Post industrial society Summary


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Goodsand

Services

Goodsand

Services

Input

Resources

MATERIALSCAPITAL

INFORMATION Facilities

Staff

Input

Resources

MATERIALSCAPITAL

INFORMATION Facilities

Staff

Performance measurement and customer evaluation of operations processes

Environment

INPUTS

Developing an

OperationsStrategy

Design of

processes

Design of

processes

Planning and

Control of Operation

s Processes

Planning and

Control of Operation

s Processes

Improvement of

processes

A General model of the Operations Function

Transformation OUTPUT

S

FEEDBACK

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OPERATION INPUT

[resources]

TRANSFORMATION

OUTPUT

Fast food Meat, BreadOnions, Staff

Cooking Burgers

University Students (main)ExaminationsBuildings

Teaching Graduates

restaurants Hungry customers(main)Food/chef/staff

Well prepared foodAgreeable environment

Satisfied customers

Police service OfficersInformationBuildingVehiclesThe public

Crime preventionCrime detection

PeaceTrust in lawApprehend

criminals


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POMPOM

MarketingMarketing

MISMISEngineeringEngineering

HRMHRM

QAQA

AccountingAccounting

SalesSalesFinanceFinance

The Scope of Operations Management

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Operations in an organisation

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Operations in an organisation

Product/servicesdevelopment

function Accountingand finance

function

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ANSWER: What is operations management?

OM is the planning, organising and control of systems which produce goods and services. It is one of the most important managerial functions although some managers may not refer to themselves as operations managers. For instance a hotel manager may will not refer to himself/herself as an operations managers. Hospital administrators do not consider themselves as operations managers. However, from the descriptions contained in this presentation their activities are those of OM. Operations is therefore all about using resources and providing value. Value in the form of products and services.


9 TEN DECISION AREAS ISSUES

1. Service and product design

2. Quality management

3. Process and capacity

4. Location

5. Layout design

6. Human resources

• What good or service should we offer?• How should we design these products?

• Who is responsible for quality? • How do we define the quality?

• What process and what capacity will these design products require?

• What equipment and technology is necessary for these processes?

• Where should we put the facility?• On what criteria should we base the location decision?

• How should we arrange the facility?• How large must the facility be to meet our plan?

• How do we provide a reasonable work and job design environment?

• How much can we expect our employees to produce?

10 TEN DECISION AREAS ISSUES

7. Supply-chain management

8. Inventory, MR & JIT

9. Intermediate and short-term

10. Maintenance

• Should we make or buy this component?• Who are our suppliers and who can integrate into our e-commerce program?

• How much inventory of each item should we have?• When do we reorder?

• Are we better off keeping people on the payroll scheduling during slowdowns?• Which job do we perform next?

• Who is responsible for maintenance?• When do we do maintenance?

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ANSWER: What are the activities of operations managers? Direct responsibilities

– Understanding the operation’s strategic objective– Developing an operations strategy for the organization– Designing the operation’s products, services and processes– Planning & control the operation– Improving the performance of the operation

Indirect responsibilities Broad responsibilities

– Globalization– Environmental protection– Social responsibility– Technology awareness– Knowledge management.


14Challenges for Operations Managers in Manufacturing Organisations:

• Global activity • Global markets - Global procurement• Logistics management a key function• Extensive use of IT (example SAP, Oracle, BAAN) • Supply Chain Management (horizontal integration)• Strategic in outlook (alliances)• Few big players (Car industry, Pharmaceuticals)• Short product life cycles• Need of high quality management - speed to market .....key performance indicator, product characteristics..

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Frederick Winslow Taylor (1856-1915):

1910: Scientific Management

The Heritage of operations management

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Frederick Winslow Taylor (1856-1915):

1. Break jobs down into their most elemental activities

2. Simplify job designs so that limited skills were required to learn a job, thus minimizing the time required for learning

3. Fair day’s work

4. Eliminate unnecessary motions

5. Choose and train employees for best performance and for the benefit of the company

6. Management is responsible for the scientific analysis of the production system and the way workers should perform their jobs; while employees should perform their jobs accordingly

7. There must be some kind of collaboration between employees and management for the mutual benefit



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Advantages of Scientific management: Increased output Lower labour cost Workers could easily be replaced and trained at low

cost, taking advantage of a large pool of cheap unskilled labour shifting from farms to industry

It allowed unskilled and uneducated workers to gain employment based solely on their willingness to work harder physically at jobs they were mentally undemanding.


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Disadvantages of Scientific management: Workers frequently became bored and dissatisfied with the

numbing repetition of simple job tasks that required little though, ingenuity, or responsibility

For Taylor, wages were the primary motivation for work, but behaviour scientists proved that the psychological content of work can be a more powerful motivating force for increased productivity than pay

Repetitive tasks requiring the same monotonous physical motions can result in unnatural physical and mental fatigue.

There is minimal opportunity for workers to interact with other workers

All the above lead to: tardiness, turnover, absenteeism and a feeling of dissatisfaction.


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1910:Scientific Management

An underdeveloped economy today- or even an “emerging” one – is one that has not – or at least has not yet – made the manual worker productive.

Peter Drucker, 1999


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Henry L Gantt (1861-1919) - bonus payment system - Gantt diagram


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Henry L Gantt (1861-1919) Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)

They devoted much of their professional life to motion study, i.e.:

a. detailed study of operatives and the working environment

b. development of techniques which would help in devising the

“one best way” of carrying out any particular operation


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Henry L Gantt (1861-1919) Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973)

1930s-40s: Human Relations and Mass production

Studies carried out at the Hawthorne plant of the Western Electric Company between 1927 and 1932, under the direction of a Harvard professor, Elton Mayo, who showed that attention to technical details was not enough. It should complimented by attention to the social factors in organisations

Henry Ford introduced the revolutionary assembly line for the production of historical Ford, T-model.

Results: 12,5 hours 93 min

$ 850 $ 265.


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Henry L Gantt (1861-1919) Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973) 1930s-40s: Human Relations and Mass production 1950s-60s: Operations Research

1970s: Widespread use of computers


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Henry L Gantt (1861-1919) Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973) 1930s-40s: Human Relations and Mass production 1950s-60s: Operations Research 1970s: Widespread use of computers

1980s:Influence of Japanese management practices

Just-in-Time (JIT)

Kanban systems

Total Quality Management, TQM

Total Quality Control, TQC


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Henry L Gantt (1861-1919) Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973) 1930s-40s: Human Relations and Mass production 1950s-60s: Operations Research 1970s: Widespread use of computers 1980s: Influence of Japanese management practices

1990s: Increasing pace of services

TQM is widely adopted as well as ISO 9000

Theory Of Constraints, TOC

ERP,

BPR

Supply Chain, etc


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Henry L Gantt (1861-1919) Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1973) 1930s-40s: Human Relations and Mass production 1950s-60s: Operations Research 1970s: Widespread use of computers 1980s: Influence of Japanese management practices 1990s: Increasing pace of services

E-business, Knowledge Management & Globalization


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GNP vs. GDP

•Primary

•Secondary

•Tertiary

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The National Economic Environment

YEAR: 2003

GDP (%) Structure of employment (%)

Sector Euro-area

USA World Euro-area USA World

Primary 2 1 4 4.5 1 4

Secondary 28 18.2 28 29.6 23 26

Tertiary 70 80.8 68 65.9 76 70

Source: Economist (2006), Pocket world in figures, London

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Year

Pro

po

rtio

n o

f to

tal

emp

loym

ent

Service; Manufacturing; Agriculture

0

10

20

30

40

50

60

70

80

90

1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

Trends in US employment from 1850-2000

Year

The National Economic Environment

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Industrial society (1820 – 1920): Post industrial society

Introduction to OM/History of Operations

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Industrial society (1820 – 1920): machines & production of goods dominated

the life of society (society divided into) Blue & white collar

workers workers start work in harmony with the daily

needs of the machine towns and cities were organized around

factory clusters life was paced around clocks, work schedules,

division of labor & market-demands


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Post industrial society: efficient industrial production so goods

affordable to “average” worker emphasis shifts from quantity and cost

good life emphasis on services & improved health and

education systems demand for greater technical and professional

skill levels from employers manufacturing is a mature activity while

service is dominated by variety


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4-Vs

36Although all operations processes are similar in that they all transform input resources into output products and services, they do differ in a number of ways, four of which are particular important, the 4-Vs:

Operations processes have different characteristics

• The Volume of their output

• The Variety of their output

• The Variation in the demand for their output

• The degree of Visibility which customers have of the production of the product or service.

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McDonald’s hamburgers Repeatability (of tasks) Specialization (of work) High Volumes

Low Cost Systemization (i.e. routine)

Types of Operations Systems (manufacturing)

Variations in Volume

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Compare McDonald’s with a small Coffee Shop with little dishes?



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Compare McDonald’s with a small Coffee Shop with little dishes?

Coffee Shop: Same items as MacLower volumeLower degree of repetitionSmaller number of staff who performs multiple tasksLess specializationLess specialized equipment

therefore Cost per burger higher (while price of burger may be the same)



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Compare a taxi company with Bus service

Taxi company offers a high-variety service: Picks you up from anywhere Takes you anywhere Follow any route you wantbut with a higher cost than bus (which has regular service

with well-defined routes)

thusHigh Variety High Cost


Variations in Variety

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• visibility means exposure• customer contact skills• front office vs. back office

The Visibility dimension

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Summer holidays in an island vs. winter in an islandVariation in demand affects the capacity, so:• Extra staff for the summer period?• Overtime?

Hotel next to a motorway:• Level demand,

so• Planning of activities well in advance (e.g. staff scheduled, food

and rooms …….in a routine and predictable manner)

therefore• High utilization of resources

therefore• unit costs are lower

The Variation dimension

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Low Volume High

High Variety Low

Island resort hotel Formula 1

High Variation Low

High Visibility Low

Small island resort • For about 10–20 visitors

Formula 1

vs.

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Low Volume High

High Variety Low

Island resort Formula 1hotel

High Variation Low

High Visibility Low

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Products & Services

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Tangible Intangible

Large systems, able to achieve “economies of scale”

Normally, small system

Complicated production operation

PRODUCTS SERVICES

Minimum contact with end user Direct contact with end user

Can be kept as an inventory Offered only during its production process

Regional, national, international markets

Local markets

Standardized Heterogeneous

Perishability Non - Perishability

Differences Between Products & Services

Simple production operation

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Intangible

Tangible

QUESTION: Put them in order1. Haircut2. Medical advice3. Washing machine4. cd player5. Cars6. Petrol7. MBA8. Legal advice9. Tires10. Financial advice11. Restaurant meal12. Car insurance policy


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Intangible

Tangible

ANSWER1. Petrol2. Cars 3. Tires4. cd player 5. Washing machine 6. Restaurant meal7. Haircut8. MBA9. Car insurance policy10. Medical advice11. Legal advice12. Financial advice


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END

Documents

1 Operations Management. 2 Chapter 1: Operations Function A general model of the operations functions Operations management activities History of