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11 Introduction to Operations Management

Introduction to Operations Management

PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e, Global Edition Operations Management, 10e, Global Edition Principles of Operations Management, 8e, Global EditionPrinciples of Operations Management, 8e, Global Edition

PowerPoint slides by Jeff Heyl

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Why Study OM?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

4. OM is such a costly part of an organization

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Ten Critical DecisionsTen Critical DecisionsTen Decision Areas Chapter(s)

1. Design of goods and services 52. Managing quality 6, Supplement 63. Process and capacity 7, Supplement 7

design 4. Location strategy 85. Layout strategy 96. Human resources and 10

job design 7. Supply-chain 11, Supplement 11

management8. Inventory, MRP, JIT 12, 14, 169. Scheduling 13, 1510. Maintenance 17 Table 1.2

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Goods and ServicesGoods and ServicesAutomobile

Computer

Installed carpeting

Fast-food meal

Restaurant meal/auto repair

Hospital care

Advertising agency/investment management

Consulting service/teaching

Counseling

Percent of Product that is a Good Percent of Product that is a Service

100% 75 50 25 0 25 50 75 100%| | | | | | | | |

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Ethics andEthics andSocial ResponsibilitySocial Responsibility

Challenges facing Challenges facing operations managers:operations managers:

Developing and producing safe, quality products

Maintaining a clean environment

Providing a safe workplace

Honoring stakeholder commitments

Scope of Operations Management

The operations function includes many interrelated activities such as:

ForecastingCapacity planningFacilities and layoutSchedulingManaging inventoriesAssuring qualityMotivating employeesDeciding where to locate facilitiesAnd more . . .

The scope of operations management ranges across the organization.

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Role of the Operations Manager

The Operations Function consists of all activities directly related to producing goods or providing services.

A primary function of the operations manager is to guide the system by decision making.

– System Design Decisions– System Operation Decisions

Student Slides 1-7

Why Study OM?• Every aspect of business affects or is affected by operations• Many service jobs are closely related to operations

– Financial services– Marketing services– Accounting services– Information services

• There is a significant amount of interaction and collaboration amongst the functional areas

• It provides an excellent vehicle for understanding the world in which we live

Student Slides1-8

OM and Supply Chain Career Opportunities

• Operations manager• Supply chain manager• Production analyst• Schedule coordinator• Production manager• Industrial engineer• Purchasing manager• Inventory manager• Quality manager

Student Slides1-9

Historical Evolution of OM

• Industrial Revolution• Scientific Management• Human Relations Movement• Decision Models and Management Science• Influence of Japanese Manufacturers

Student Slides 1-10

Key Issues for Operations Managers Today

• Economic conditions• Innovating• Quality problems• Risk management• Competing in a global economy

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The Need for Supply Chain Management

• In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems:– Oscillating inventory levels– Inventory stockouts– Late deliveries– Quality problems

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What is Operations Management?

“ Operation Management is the set of activities that create goods and services through the transformation of inputs into outputs.”

(Slack, 2001)

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Typical Organization Chart

Source: Reid and Sanders, 2005.

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Activities of Operations manager

Understand the operation’s strategic objectives

Developing an operation’s strategy for the organization

Designing the operation’s products, services and processes

Planning and controlling the operation Improving the performance of the operation.

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Design elegant products which can be flat packed efficiently

Design Store LayoutSite Location

Storage

Quality

Some Activities of an Operations Manager

The input-transformation-output model

TransformationprocessInput Output

Goods and services

Transformed resources

MaterialsInformationCustomers

Transforming resources

FacilitiesStaff

Source: Slack, 2001

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Similarities-Service/Manufacturers

All use technology Both have quality, productivity, &

response issues All must forecast demand Each will have capacity, layout, and

location issues All have customers and suppliers All have scheduling and staffing issues

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Historical Development of OM

Industrial revolution Late 1700s Scientific management Early 1900’s Human relations movement 1930s to 1960s Management science Mid-1900s Computer age 1970s Just-in-Time Systems (JIT) 1980s Total quality management (TQM) 1980’s Reengineering 1990s Flexibility 1990s Time-Based Competition 1990s Supply chain Management 1990’s Global Competition 1990s Environmental Issues 1990s Electronic Commerce Late 1990s

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Today’s OM Environment

Customers demand better quality, faster deliveries, and lower costs

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Competitive Priorities- The Edge

Four Important Operations Questions: Will you compete on –

Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?

Source: Reid and Sanders, 2005.

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Speed

Cost

Depend-ability

Flexibility Quality

Lower prices (or higher profits)

Faster customer response

Error-free products and services

Wider varietyMore customisationMore innovationCope with volume fluctuations

On-time deliveries

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Are There Priority Tradeoffs? Which priorities are “Order Qualifiers”? e.g. Must have excellent quality since everyone expects it

Which priorities are “Order Winners”? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonald’s competes on consistency FedEx competes on speed Custom tailors compete on flexibility

Can you have both high quality and low cost? e.g. Yes, Coke and Pepsi are good examples

Can you offer design flexibility and short delivery? e.g. Yes, modular housing manufacturers do it

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Measuring Productivity Productivity is a measure of how efficiently inputs are

converted to outputs Productivity = output/input

Total Productivity Measure Total Productivity = $sales/inputs $

Partial Productivity Measure Partial Productivity = cars/employee

Multifactor Productivity Measure Multi-factor Productivity = sales/total

$costs

Source: Reid and Sanders, 2005.

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Highlights Business Strategy is a long

range plan. Functions develop supporting plans

Strategy must address mission, environment, and core competencies

Business strategy provides a guide for designing operations strategy

Operations strategy must consider which competitive priorities are essential to meet business objectives

Competitive priorities are cost, quality, time, and flexibility

Productivity measures how effectively a firm is using resources

Productivity is computed as a ratio of outputs divided by inputs

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References Reid R.D., and Sanders N. R., (2005)

Operations Management, 2nd Edition, Wiley Publication.

Slacks Nigel and Lewis Mike, (2002) Operations Management, Prentice Hall.