1 introduction (68) [compatibility mode] 21-68

8/18/2019 1 Introduction (68) [Compatibility Mode] 21-68

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Amity Business School 12/12/20

SS Pal/Ent-OM-1

Amity Business School

The Nature of Operations

Management

Operations management is constantly changing and

here are some of the 3 key themes:

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1. The Role of Services in

Operations Management

Although historically associated with manufacturing

industry there has been a shift in the theory and practice

of operations management to incorporate service

systems


• The rise to prominence of the service sector in the economies

of developed countries is due to an increase in what are

termed consumer services and producer services.

– Consumer services are services aimed at the final consumers and

these have risen in line with people’s increasing disposable income in

developed countries.

– Producer services are used in the production and delivery of goods

and services and constitute firms providing services such as

consultancy advice, legal advice, IT support, transportation and

maintenance facilities.

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• Types of Service Operations

– Services can be classified by their tangibility, while the way they are

delivered can be classified by their simultaneity.

• Tangibility

– This is the most commonly used distinction between goods and

services. Goods are tangible, they are a physical thing you can touch. A

service is intangible and can be s een as a process that is activated on

demand. In reality however both goods and services have both

tangible and intangible elements and can be placed on a continuum

ranging from low to high intangibility

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• Simultaneity

– This relates to the characteristic that services are

produced and consumed simultaneously. This

means the service provider and customer will

interact during the service delivery process. The

amount of interaction is termed the degree of

customer contact.

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• The Degree of Customer Contact in Services

– It should not be assumed that all employees in a

service operation have to deal directly with a

customer. This distinction in services is denoted by

‘back office’ tasks which add value to the inputs of the

service operation and ‘front office’ tasks which deal

with the customer both as an input and output of the

operation

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Core services are basic things

that customers want from

products they purchase

Core Services

Defined


Core Services Performance Objectives

Operations

ManagementFlexibility

Quality

Speed

Price (or cost

Reduction)


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Value-added services

differentiate the organization

from competitors and build

relationships that bind

customers to the firm in a

positive way

Value-Added Services

Defined


Value-Added Service Categories

Operations

ManagementInformation

Problem Solving

Sales Support

Field Support


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• Strategy – Provides direction for achieving a mission

• Five Steps for Strategy Formulation – Defining a primary task

• What is the firm in the business of doing?

– Assessing core competencies• What does the firm do better than anyone else?

– Determining order winners and order qualifiers• What qualifies an item to be considered for purchase?

• What wins the order?

– Positioning the firm• How will the firm compete?

– Deploying the strategy

Strategy and OperationsAmity Business School

• Operations strategy can be seen from market-basedand resource-based perspectives. – Using a market-based approach to operations strategy the

organisation makes a decision regarding the markets andthe customers within those markets that it intends totarget. This market position is then translated into a list of criteria or objectives which define what kind of performance is required in order to successfully competein the markets chosen.

– Using a resource-based view works from the inside-out of the firm, rather than the outside-in perspective of the

market-based approach. Here an assessment of theoperations tangible and intangible resources andprocesses leads to a view of the operations capability

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2. The Strategic Role of Operations


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• Technology plays a key role in the transformation process of which operations is responsible for. Process technology isused to help transform the three main categories of transformed resources which are materials, customers andinformation.

– Computer Aided Design (CAD) allows testing of product and servicedesigns using computer-based drawings.

– Customer processing technology such as automated teller machinescan reduce or eliminate the need for employee contact in customer-facing operations.

– Information technologies such as e-business systems are having amajor effect on how firms organise their s upply chains and utilise theircapacity

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3. Technology and Operations Management


• To 18th Century – Craft Production

• 18th Century – Industrial Revolution – Volumeproduction

• 20th Century – Henry Ford – Mass Production

• 1960’s Operations Management emerges

• 1970’s MRP

• 1980’s JIT and TQM

• 1990’s SCM and BPR

• 2000+ E-Commerce 34

The History of Operations

Management


Historical Development of OM

• JIT and TQC

• Manufacturing Strategy Paradigm

• Service Quality and Productivity

• Total Quality Management and QualityCertification


Historical Development of OM

(cont’d)

• Business Process Reengineering

• Supply Chain Management

• Electronic Commerce


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Current Issues in OM

• Coordinate the relationships between

mutually supportive but separate

organizations.

• Optimizing global supplier, production,

and distribution networks.

• Increased co-production of goods and

services


Current Issues in OM (cont’d)

• Managing the customers

experience during the service

encounter

• Raising the awareness of

operations as a significant

competitive weapon


Ten Critical DecisionsTen Critical Decisions

Ten Decision AreasTen Decision Areas

Design of goods and servicesDesign of goods and services Managing qualityManaging quality Process and capacityProcess and capacity

designdesign Location strategyLocation strategy Layout strategyLayout strategy Human resources andHuman resources and

job design job design Supply chainSupply chain

managementmanagement Inventory managementInventory management SchedulingScheduling MaintenanceMaintenance


The Critical DecisionsThe Critical Decisions

Design of goods and services What good or service should we offer?

How should we design these productsand services?

Managing quality How do we define quality?

Who is responsible for quality?


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Process and capacity design

What process and what capacity will

these products require?

What equipment and technology is

necessary for these processes?

Location strategy

Where should we put the facility?

On what criteria should we base the

location decision?



Layout strategy

How should we arrange the facility?

How large must the facility be to meet

our plan?

Human resources and job design

How do we provide a reasonable work

environment?

How much can we expect our employees

to produce?



Supply chain management

Should we make or buy this component?

Who are our suppliers and who can

integrate into our e-commerce program?

Inventory, material requirements planning,

and JIT

How much inventory of each item should wehave?

When do we re-order?



Intermediate and short–term

scheduling

Are we better off keeping people on the

payroll during slowdowns?

Which jobs do we perform next?

Maintenance

Who is responsible for maintenance?

When do we do maintenance?


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Where are the OM Jobs?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


TheThe Heritage of OMHeritage of OM

Division of labor (Adam Smith 1776; Charles BabbageDivision of labor (Adam Smith 1776; Charles Babbage1852)1852)

Standardized parts (Whitney 1800)Standardized parts (Whitney 1800)

Scientific Management (Taylor 1881)Scientific Management (Taylor 1881)

Coordinated assembly line (Ford/ Sorenson 1913)Coordinated assembly line (Ford/ Sorenson 1913)

Gantt charts (Gantt 1916)Gantt charts (Gantt 1916)

Motion study (Frank and Lillian Gilbreth 1922)Motion study (Frank and Lillian Gilbreth 1922)

Quality control (Shewhart 1924; Deming 1950)Quality control (Shewhart 1924; Deming 1950)


The Heritage of OMThe Heritage of OM

Computer (Atanasoff 1938)Computer (Atanasoff 1938)

CPM/PERT (DuPont 1957)CPM/PERT (DuPont 1957)

Material requirements planning (Orlicky 1960)Material requirements planning (Orlicky 1960)

Computer aided design (CAD 1970)Computer aided design (CAD 1970)

Flexible manufacturing system (FMS 1975)Flexible manufacturing system (FMS 1975)

Baldrige Quality Awards (1980)Baldrige Quality Awards (1980)

Computer integrated manufacturing (1990)Computer integrated manufacturing (1990)

Globalization (1992)Globalization (1992)

Internet (1995)Internet (1995)


Eli WhitneyEli Whitney

Born 1765; died 1825Born 1765; died 1825

In 1798, received governmentIn 1798, received governmentcontract to make 10,000 musketscontract to make 10,000 muskets

Showed that machine tools couldShowed that machine tools couldmake standardized parts to exactmake standardized parts to exactspecificationsspecifications

Musket parts could be used in anyMusket parts could be used in anymusketmusket


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Frederick W. Taylor Frederick W. Taylor


Known as ‘father of scientificKnown as ‘father of scientificmanagement’management’

In 1881, as chief engineer forIn 1881, as chief engineer forMidvale Steel, studied how tasksMidvale Steel, studied how taskswere donewere doneBegan first motion and time studiesBegan first motion and time studies

Created efficiency principlesCreated efficiency principles


Taylor’s PrinciplesTaylor’s Principles

Matching employees to right job

Providing the proper training

Providing proper work methods and tools

Establishing legitimate incentives for

work to be accomplished

Management Should Take MoreManagement Should Take MoreResponsibility for:Responsibility for:


Frank & Lillian GilbrethFrank & Lillian Gilbreth

Frank (1868Frank (1868--1924); Lillian (18781924); Lillian (1878--1972)1972)

HusbandHusband--andand--wife engineering teamwife engineering team

Further developed work measurementFurther developed work measurementmethodsmethods

Applied efficiency methods to their homeApplied efficiency methods to their homeand 12 children!and 12 children!

Book & Movie: “Cheaper by the Dozen,”Book & Movie: “Cheaper by the Dozen,”book: “Bells on Their Toes”book: “Bells on Their Toes”



In 1903, created Ford Motor CompanyIn 1903, created Ford Motor Company

In 1913, first used moving assembly lineIn 1913, first used moving assembly lineto make Model T to make Model T Unfinished product moved by conveyor pastUnfinished product moved by conveyor past

work stationwork station

Paid workers very well for 1911 ($5/day!)Paid workers very well for 1911 ($5/day!)

Henry FordHenry Ford


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W. Edwards DemingW. Edwards Deming


Engineer and physicistEngineer and physicist

Credited with teaching JapanCredited with teaching Japanquality control methods in postquality control methods in post--WW2WW2

Used statistics to analyze processUsed statistics to analyze process

His methods involve workers inHis methods involve workers in

decisionsdecisions


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Historical Events in Operations Management

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776 Adam Smith

Interchangeable parts 1790 Eli Whitney

Scientific

Management

Principles of scientific

management1911 Frederick W. Taylor

Time and motion studies 1911Frank and LillianGilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford


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Historical Events in Operations Management(cont.)

Era Event s/Concept s Dat es Originator

Human

Relations

Hawthorne studies 1930 Elton Mayo

Motivation theories

1940s Abraham Maslow

1950s Frederick Herzberg

1960s Douglas McGregor

Operations

Research

L inear programming 1947 George Dantzig

Digital computer 1951 Remington Rand

Simulation, waiting

line theory, decision

theory, PERT/CPM

1950sOperations research

groups

MRP, EDI, CIM1960s,

1970s

Joseph Orlicky, IBM

and others


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Historical Events in Operations Management(cont.)

Era Events/Concepts Dates Originator

Quality

Revolution

JIT (just- in-time) 1970s Taiichi Ohno (Toyota)

TQM (total quality

management)1980s

W. Edwards Deming,

Joseph Juran

Strategy and

operations1980s

Wickham Skinner,

Robert Hayes

Business processreengineering 1990sMichael Hammer,

James Champy

Six Sigma 1990s GE, Motorola


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Historical Events in Operations Management (cont.)

Era Events/Concepts Dates Originat or Internet

Revolution

Internet, WWW, ERP,

supply chain management

1990s ARPANET, Tim

Berners-Lee SAP,

i2 Technologies,

ORACLEE-commerce 2000s Amazon, Yahoo,

eBay, Google, and

others

Globalization WTO, European Union,

and other trade

agreements, global supply

chains, outsourcing, BPO,

Services Science

1990s

2000s

Numerous countries

and companies


Contributions FromContributions From

Human factors

Industrial engineering

Management science

Biological science

Physical sciences

Information technology


New Challenges in OMNew Challenges in OM

Global focusGlobal focus

JustJust--inin--timetime

Supply chain partneringSupply chain partnering

Rapid productRapid productdevelopment, alliancesdevelopment, alliances

Mass customizationMass customization

Empowered employees,Empowered employees,teamsteams

ToToFromFrom Local or national focusLocal or national focus

Batch shipmentsBatch shipments

Low bid purchasingLow bid purchasing

Lengthy product developmentLengthy product development

Standard productsStandard products

Job specializationJob specialization


New Trends in OMNew Trends in OM

Local or Local or

national national

focusfocus

Reliable worldwideReliable worldwidecommunication and communication and transportation networkstransportation networks

Global focus,Global focus,moving moving production productionoffshoreoffshore

Batch (large)Batch (large)shipmentsshipments

Short product life cyclesShort product life cyclesand cost of capital put and cost of capital put pressure on reducing pressure on reducing inventory inventory

Just Just- -inin- -timetime performance performance

Low Low- -bid bid

purchasing purchasing

Supply chain competitionSupply chain competition

requires that suppliers berequires that suppliers beengaged in a focus on theengaged in a focus on theend customer end customer

Supply chainSupply chain

partners, partners,collaboration,collaboration,alliances,alliances,outsourcing outsourcing

PastPast CausesCauses FutureFuture


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Lengthy Lengthy

product product

development development

Shorter life cycles,Shorter life cycles,Internet, rapid international Internet, rapid international communication, computer communication, computer- - aided design, and aided design, and international collaborationinternational collaboration

Rapid product Rapid product development,development,alliances,alliances,collaborativecollaborativedesignsdesigns

Standardized Standardized products products

Affluence and worldwide Affluence and worldwidemarkets; increasingly markets; increasingly flexible productionflexible production processes processes

MassMasscustomizationcustomizationwith added with added emphasis onemphasis onquality quality

JobJobspecializationspecialization

Changing sociocultureChanging socioculturemilieu; increasingly amilieu; increasingly aknowledge and informationknowledge and informationsociety society

Empowered Empowered employees,employees,teams, and leanteams, and lean production production




Low Low- -cost cost

focusfocus

Environmental issues, ISO Environmental issues, ISO 14000, increasing disposal 14000, increasing disposal costscosts

Environmentally Environmentally sensitivesensitive production, green production, greenmanufacturing,manufacturing,recycled recycled materials,materials,remanufacturing remanufacturing

Ethics not Ethics not

at forefront at forefront

Businesses operate moreBusinesses operate moreopenly; public and global openly; public and global review of ethics; oppositionreview of ethics; oppositionto child labor, bribery,to child labor, bribery, pollution pollution

High ethical High ethical standards and standards and social social responsibility responsibility expected expected




Global focus

Just-in-time performance

Supply chain partnering

Rapid product development

Mass customization

Empowered employees

Environmentally sensitive production

Ethics

Output ≠ f (Input)


Productivity ChallengeProductivity Challenge

Productivity is the ratio of outputs (goodsProductivity is the ratio of outputs (goodsand services) divided by the inputsand services) divided by the inputs

(resources such as labor and capital)(resources such as labor and capital)

The objective is to improve productivity!The objective is to improve productivity!

Important Note!Production is a measure of output only and not a

measure of efficiency


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FeedbackFeedback looploop

OutputsOutputs

Goodsand

services

ProcessesProcesses

The production economicsystem transforms inputs tooutputs at about an annual

2.5% increase in productivityper year. The productivityincrease is the result of a

mix of capital (38% of 2.5%),labor (10% of 2.5%), and

management (52% of 2.5%).

The Economic SystemThe Economic System

InputsInputs

Labor,capital,

management


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Globalization and Competitiveness

• Why “go global”?

– favorable cost

– access to international markets

– response to changes in demand

– reliable sources of supply

– latest trends and technologies

• Increased globalization

– results from the Internet and falling trade

barriers


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Productivity and Competitiveness• Solution Focus

– products are solutions and making the solutions morepowerful and preferable to customers is the striving for competitiveness

• Competitiveness – degree to which a nation can produce goods and services

that meet the test of international markets

• Productivity – ratio of output to input

• Output – sales made, products produced, customers served,

meals delivered, or calls answered

• Input – labor hours, investment in equipment, material usage, or

square footage


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• Retrenching

– productivity is increasing, but both output and input

decrease with input decreasing at a faster rate

• Assumption that more input would cause

output to increase at the same rate

– certain limits to the amount of output may not be

considered

– output produced is emphasized, not output sold ;

increased inventories

Productivity and Competitiveness (cont.)

1 introduction (68) [compatibility mode] 21-68

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