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Its all about Operational Managment
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Introduction to
Operations Management
Operations Management
Organization
Finance Operations Marketing
The management of systems or processes that create goods and/or provide services
Introduction to Operations Management
• Operations Management includes:– Forecasting– Capacity planning– Scheduling– Managing inventories– Assuring quality– Motivating employees– And more . . .
Introduction to Operations Management
Business Operations Overlap
Marketing
Operations
Finance
Steel productionAutomobile fabrication
House buildingRoad construction
DressmakingFarming
Auto RepairAppliance repair
Maid ServiceManual car wash
TeachingLawn mowing
Low service contentHigh goods content
High service contentLow goods content
Increasinggoods content
Increasingservice content
Goods-service continuum
Stage of Production Value Added
Value of Product
Farmer 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
Introduction to Operations Management
Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,manufacturing, power generation
Storage/Transportation Warehousing, trucking, mailservice, moving, taxis, buses,hotels, airlines
Exchange Retailing, wholesaling, banking,renting, leasing, library, loans
Entertainment Films, radio and television,concerts, recording
Communication Newspapers, radio and televisionnewscasts, telephone, satellites
Value-Added
The difference between the cost of inputs and the value or price of outputs.
Inputs Land Labor Capital
Transformation/Conversion
process
Outputs Goods Services
Control
Feedback
FeedbackFeedback
Value added
Food Processor
Inputs Processing Outputs
Raw Vegetables Cleaning Canned vegetablesMetal Sheets Making cans
Water CuttingEnergy CookingLabor PackingBuilding LabelingEquipment
Hospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy patientsHospital Surgery
Medical Supplies MonitoringEquipment MedicationLaboratories Therapy
Introduction to Operations Management
Operations Interfaces
Public Relations
Accounting
IndustrialEngineering
Operations
Maintenance
PersonnelPurchasing
Distribution
MIS
Introduction to Operations Management
Decision Making
System Design– capacity– location– arrangement of departments– product and service planning– acquisition and placement of
equipment
Introduction to Operations Management
Decision Making
System operation– personnel– inventory– scheduling– project
management– quality assurance
Introduction to Operations Management
Major Characteristics of Production Systems
Degree of standardizationType of operation– project– job shop– repetitive production– continuous processing
Introduction to Operations Management
Manufacturing or Service?
Tangible Act
Introduction to Operations Management
Key Differences
• Customer contact
• Uniformity of input
• Labor content
• Uniformity of output
• Measurement of productivity
• Quality assurance
These differences are beginning to fadein many cases
Introduction to Operations Management
Manufacturing vs Service
CharacteristicOutput
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct
ManufacturingTangible
Low
High
Low
High
Easy
High
ServiceIntangible
High
Low
High
Low
Difficult
Lowquality problems
High
Introduction to Operations Management
Responsibilities of Operations Management
Products & services
Planning– Capacity– Location–– Make or buy– Layout– Projects– Scheduling
Controlling– Inventory– Quality
Organizing– Degree of centralization– Subcontracting
Staffing– Hiring/laying off– Use of Overtime
Directing– Incentive plans– Issuance of work orders– Job assignments
Introduction to Operations Management
Models
A model is an abstraction of reality.
– Physical– Schematic– Mathematical
What are the pros and cons of models?
Tradeoffs
Introduction to Operations Management
Systems Approach
“The whole is greater than the sum of the parts.”
SuboptimizationSuboptimization
Introduction to Operations Management
Quantitative Approaches
• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models
Introduction to Operations Management
Pareto Phenomenon
• A vital few things are important for reachingan objective or solving a problem.
• 80/20 Rule - 80% of problems are caused by20% of the activities.
How do we identify the vital few?
Introduction to Operations Management
• The Internet• E-Business• Supply Chain Management
Recent TrendsIntroduction to Operations Management
Suppliers’ Suppliers
DirectSuppliers Producer Distributor Final
Consumer
Simple Product Supply ChainIntroduction to Operations Management
Continuing Trends
• Quality and process improvement
• Technology
• Globalization
• Operations strategy
• Environmental issues
Introduction to Operations Management
