1 pom an introduction

7/31/2019 1 POM an Introduction

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An Introduction

Prepared By: Gurpreet Singh


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Introduction The consumption of Goods and Services is an Integral part of

our Society.

Production & Operations Management is responsible for

creating those Goods and Services. Organizations exist primarily to provide Services or to create

Goods.

Production & Operations is the Core function of an

organization.



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Production & Operations Management

Production & Operations Management is the management of

that part of an organization that is responsible for producing

goods and/or services.

Definition:

The management of systems or processes that create goods

and/or provide services.

Production & Operations Management affects:

Companies ability to compete

Nations ability to compete internationallyPrepared By: Gurpreet Singh


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Business OrganizationBusiness Organization

The Three Basic Functions


Organization

Finance Operations Marketing


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Finance:

Responsible for securing financial resources at favorable

prices.

Allocating those resources throughout the organization.

Budgeting.

Analyzing investment proposals.

Providing funds for operations.



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Marketing:

Responsible for assessing customer wants and needs.

Selling and promoting the organization's goods or services.

Operations

Responsible for producing the goods or providing theservices offered by the organization.

It is the core of what organization does.



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ValueValue--Added ProcessAdded ProcessThe operations function involves the conversion of

inputs into outputs

Value added


npu sLand

Labor

Capital

Transformation/

Conversion

process

OutputsGoods

Services

Control

Feedback

FeedbackFeedback


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Value-Added & Product Packages Value-added is the difference between the cost of inputs and

the value or price of outputs.

The essence of the operations management is to add value

during the transformation process. For non-profit org = Value to Society.

For profit org = Prices that customers are willing to pay for those

goods or services.

Product packages are a combination of goods and services.

Product packages can make a company more competitive.Prepared By: Gurpreet Singh


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GoodsGoods--service Continuumservice Continuum

Goods Service

Surgery, teaching


Automobile assembly, steel making

Home remodeling, retail sales

Automobile Repair, fast food

Computer repair, restaurant meal

Song writing, software development


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Product ExampleProduct Example

Inputs Processing Outputs

Raw Ve etables Cleanin Canned

Food ProcessorFood Processor


vegetablesMetal Sheets Making cansWater CuttingEnergy Cooking

Labor PackingBuilding LabelingEquipment


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Service ExampleService Example

Inputs Processing Outputs

Doctors, nurses Examination Health

Hospital ProcessHospital Process


patientsHospital Surgery Medical Supplies MonitoringEquipment Medication

Laboratories Therapy


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Manufacturing or Service?Manufacturing or Service?

Tangible Act



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Production of Goods Vs. Delivery of Services

Production of goods: Tangible O/P

Delivery of services: An Act

Service job categories:

Government Wholesale/retail

Financial services

Healthcare Personal services

Business services

EducationPrepared By: Gurpreet Singh


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Production of Goods Vs. Delivery of Services

Service job categories:

Government: Federal, State, Local.

Wholesale/retail: Clothing, Stationary, Toys etc.

Financial services: Banking, Stock Brokerage, Insurance etc. Healthcare: Doctors, Dentists, Hospitals etc.

Personal services: Laundry, Dry Cleaning, Hair/Beauty,

Gardening etc.

Business services: Data Processing, e-business, delivery etc.

Education: Schools, Colleges etc.Prepared By: Gurpreet Singh


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Similarity & Difference B/W Goods & Services

Manufacturing and service are often different in terms ofwhat

is done but similar in terms ofhow it is done. E.g.:

Both involve Design and Operating decisions.

Manufacturing must decide what size of Factory is needed. Service organizations must decide what size of building is needed.

Both must take decisions of:

Location

Work Schedules

Capacity

Allocation of Scarce resources.



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Key Differences B/W Goods & Services

1. Customer contact

2. Uniformity of input

3. Labor content of jobs

.

5. Measurement of productivity

6. Production and delivery

7. Quality assurance8. Amount of inventory

9. Evaluation of work

10. Ability to patent designPrepared By: Gurpreet Singh


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Scope of POMScope of POM Production & Operations Management includes:

Forecasting

Capacity planning

Schedulin

Managing inventories

Assuring quality

Motivating employees

Deciding where to locate facilities

Supply chain management

And more . . .



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Scope of POMScope of POM Service organization example: Airline Company

Forecasting: Weather, Landing conditions, Seat demand, growth in airtravel etc.

Capacity planning: Planes (Too many or too few, right no. of planes in

wrong places).

Scheduling: Planes (Flights, Maintenance), Pilots, Flight attendants,

Ground Crews, Counter Staff, Baggage handlers etc.

Managing inventories: Foods & Beverages, First Aid Equipment, In-flight-magazines, Pillows, Blankets etc.

Assuring quality: Safety, Customer dealings (Ticket counter, Check-in,

Telephone/Electronic reservation etc).Prepared By: Gurpreet Singh


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Scope of POMScope of POM Service organization example: Airline Company

Motivating employees: All phases of operations.

Deciding where to locate facilities: Decisions on which cities to

provide service, Where to locate maintenance facilities, Where to locatemajor and minor hubs etc.



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Scope of POMScope of POM Production organization example: Bicycle Factory

Forecasting: Manufacturing, Sales, Man power etc.

Capacity planning: Buying Components (Frames, Tires, Wheels, Gears

from suppliers and then assembling bicycles), Fabrication work, Forming

frames, making Gears and Chains, buying Raw Materials, Few Parts (Paint,

Nut/Bolts, Tires) etc.

Scheduling: Which components to buy, Ordering Parts and Material, Styleof Bicycle to produce and how many, Purchasing new equipment etc.

Managing inventories: Raw Materials, Parts, Components etc.



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Scope of POMScope of POM Production organization example: Bicycle Factory

Assuring quality: To meet the quality standards.

Motivating employees: Motivating Workers.

Deciding where to locate facilities: Factory, Worker Houses etc.



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Design and Operation of System System Design:

Involves decisions that relate to: (Strategic Decisions)

System Capacity

eograp ca ocat on o ac t es

Arrangement of Departments

Placement of equipment within Physical Structures

Product and Service Planning Acquisition of Equipment.



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Design and Operation of System System Operation: (Tactical and Operational Decisions)

Involves decisions that relate to:

Management of Personnel

nventory ann ng an ontro

Scheduling

Project Management

Quality Assurance Feedback on these decisions involves Measurement and

Control.



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Other Areas of POM Purchasing

Industrial Engineering

Distribution

Maintenance



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Other Areas of POM Purchasing:

Procurement of Materials, Supplies and Equipment. Close contact with operation is necessary to ensure correct quantities and timing

of purchases.

Acts as an evaluator to vendors for Quality, Reliability, Service, Price, etc. Industrial Engineering:

Concerned with:

Scheduling Performance Standards

Work Methods

Quality Control

Materials Handling



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Other Areas of POM Distribution:

Involves:

Shipping of Goods to Warehouses, Retail Outlets or Final Customers.

It is responsible for:

General Upkeep and Repair of Equipment

Buildings and Grounds

Heating and Air-Conditioning

Removing Toxic Wastes

Parking

Security.Prepared By: Gurpreet Singh


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Decline in Manufacturing Jobs The Service sector now accounts for more than 70% of jobs in US,

and is growing in other countries as well.

The number of people in services are increasing while the number of

.

Productivity:

Increasing productivity allows companies to maintain or increase their

output using fewer workers.

Outsourcing:

Some manufacturing work has been outsourced to more productive

companies.Prepared By: Gurpreet Singh


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A Scenario

Year Mfg. Service45 79 21

50 72 28

55 72 28

U.S. Manufacturing vs. Service Employment

80

90Mfg.

Service


60 68 3265 64 36

70 64 36

75 58 42

80 44 46

85 43 57

90 35 65

95 25 75

00 30 70

02 25 75

0

1020

30

40

5060

45 50 55 60 65 70 75 80 85 90 95 00 02 05

Year

Percent


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Why Manufacturing Matters? Over 18 million workers in manufacturing jobs.

Accounts for over 70% of value of U.S. exports. Average full-time compensation about 20% higher than average of all workers.

Manufacturing workers more likely to have benefits.

Productivity growth in manufacturing in the last 5 years is more than doubleU.S. economy.

More than half of the total R&D performed is in the manufacturing industries.

Manufacturing workers in California earn an average of about $25,000 more a

year than service workers.

In California manufacturing job is lost, an average of 2.5 service jobs are lost.



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Challenges of Managing Services Service jobs are often less structured than manufacturing jobs.

Customer contact is higher.

Worker skill levels are lower.

Services hire many low-skill, entry-level workers. Employee turnover is higher.

Input variability is higher.

Service performance can be affected by workers personal

factors.



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Operations Management Decision Making

It is important to make informeddecisions.

Key Decisions of Operations Managers WhatWhat resources/what amounts

WhenResources needed/scheduled/ordered

WhereWork to be done

HowProduct or Service designed

WhoTo do the work



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General Approaches to Decisions Making

Models

Quantitative approaches

Analysis of trade-offs

Systems approach Establishing priorities

Ethics



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Models:

An abstraction of reality.

A simplified representation of something.

. . ,

visual features (shape, wheels etc.) that make it suitable for childs learning and

playing.

Other examples include automobile test tracks and crash tests, formulas,

graphs & charts, balance sheets & income statements and financial ratios etc. Common statistical models include descriptive statistics such as mean,

median, mode, range and standard deviation, random sampling, normal

distribution, regression equations etc.Prepared By: Gurpreet Singh


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Types of models:

Physical

Schematic

Mathematical



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General Approaches to Decisions Making Types of models:

Physical: Look like real-life counterparts.

Visual correspondence to reality.

. . , , , , , - .

Schematic:

Less resemblance to physical reality.

Simple to construct and change.

E.g. Graphs & Charts, Blueprints, Pictures, Drawings etc.

Mathematical:

Abstract i.e. dont look like real-life counterparts.

Easiest to manipulate

E.g. Numbers, Formulas, Symbols etc.Prepared By: Gurpreet Singh


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Models Are Beneficial:

Easy to use, less expensive.

Require users to organize and quantify information.

.

Enable what if questions.

Consistent tool for evaluation and standardized format.

Power of mathematics.



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Limitations of Models:

Quantitative information may be emphasized over

qualitative.

Models may be incorrectly applied and resultsmisinterpreted.

Nonqualified users may not comprehend the rules on how

to use the model.

Use of models does not guarantee good decisions.



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QuantitativeQuantitative ApproachesApproaches::

AnAn attemptattempt toto obtainobtain mathematicallymathematically optimaloptimal solutionssolutions toto

managerialmanagerial problemsproblems..

Linear programming: Allocation of scarce resources.

Queuing Techniques: To analyze waiting lines form.

Inventory models: To control inventories.

Project models: PERT & CPM (planning, coordinating and controlling

large-scale projects).

Statistical models: For decision making.Prepared By: Gurpreet Singh


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Systems Approach:

System:

A system can be defined as a set of interrelated parts that must

wor toget er.

E.g. Business organization composed of subsystems (Marketing

subsystem, Finance subsystem, Operations subsystem etc) which

in turn composed of lower subsystems.



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General Approaches to Decisions Making SystemsSystems ApproachApproach::

The whole is greater than the sum of the parts.i.e. the O/P and objectives of the organization as a whole takepriority over those of any one subsystem.


SuboptimizationSuboptimization


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SystemsSystems ApproachApproach::

E.g. If the upcoming model of an automobile will add antilock brakes, a designer

must take into account how customers will view the chan e instructions for

using the brakes, chance for misuse, the cost of producing the new brakes,

installation procedures, recycling worn-out brakes and repair procedures.

In addition, workers will need training to make and/or assemble the brakes,

production scheduling may change, inventory procedures may have to

change, quality standards will have to be established, advertising must be

informed of the new features and parts suppliers must be selected.



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EstablishingEstablishing PrioritiesPriorities::

CertainCertain factorsfactors areare moremore importantimportant thanthan othersothers..

EE..gg..

wn ngwn ng anan opera ngopera ng anan au omo eau omo e..

CertainCertain partsparts areare givengiven moremore prioritypriority thanthan othersothers.. EE..gg.. Engine,Engine,

Brakes,Brakes, TiesTies overover SeatSeat covers,covers, Paint,Paint, DentsDents etcetc..

BetweenBetween thesethese twotwo extremesextremes lieslies aa rangerange ofof IntermediateIntermediate

prioritypriority whichwhich shouldshould bebe givengiven attentionattention correspondingcorresponding toto

theirtheir importanceimportance toto thethe overalloverall goalgoal.. EE..gg.. WheelWheel Alignment,Alignment,

HeadlightsHeadlights outout ofof adjustment,adjustment, WeakWeak BatteryBattery etcetc..Prepared By: Gurpreet Singh


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Ethical Issues: (Managers)

Financial statements Worker safety

Quality

Environment

Community

Hiring/firing workers

Closing facilities

Workers rights



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Financial statements: Accurately representing the organizations financialcondition.

,

working condition, maintaining a safe working environment.

Product safety: Providing products that minimizes the risk of injury to users

or damage to property or the environment.

Quality: Honoring warranties, avoiding hidden defects.

Environment: Not doing things that will harm environment.

Community: Being a good neighbor.



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Hiring/firing workers: False pretenses (E.g. Promising a long-term job

when that is not what is intended etc).

honoring commitments that have been made.

Workers rights: Respecting workers rights, dealing with workers problems

or members conduct.

Many organization have developed codes of ethics to guide

employees or members conduct.



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Why Study POM? 50% or more of all jobs are in operations management or

related fields.

BusinessBusiness OperationsOperations OverlapOverlap::

F nanceF nance

OperationsOperations

MarketingMarketing

AlthoughAlthough 33 primaryprimary functionsfunctions inin businessbusiness organizationsorganizations performperform

differentdifferent activities,activities, manymany ofof theirtheir decisionsdecisions impactimpact thethe otherother

areasareas ofof thethe organizationorganization..



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Why Study POM?...

O erations

Business Operations Overlap:Business Operations Overlap:


FinanceMarketing


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Why Study POM?... BusinessBusiness OperationsOperations OverlapOverlap::

Finance: (Finance & Operations management personnel cooperate byexchanging information and expertise)

u ge ng mus e per o ca y prepare o p an nanc a

requirements. Budgets must sometimes be adjusted and performance relative to

a budget must be evaluated.

Economic analysis of investment proposals: Evaluation of

alternative investments in plant and equipment requires I/Ps from both

operations and finance people.

Provision of funds: The necessary funding of operations and the amount

and timing of funding is important, critical when funds are tight.Prepared By: Gurpreet Singh


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Marketing:

Focus on selling and/or promoting the goods or services of an

organization.

Responsible for assessing customer wants and needs and

communicating those to operations people and to design people.

Operations needs information about demand so it can planaccordingly (e.g. purchase material, schedule work etc.), while

design people need information that relates to improving current

products and services and designing new ones.Prepared By: Gurpreet Singh


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Marketing: Marketing, design and production must work closely together to

products.

Finance people should be included in these exchanges in order to provide

information on what funds might be available and what might be needed

for new products or services.

Marketing also needs one important information from operations is the

manufacturing or service Lead Time: Time between ordering a good or

service and receiving it.Prepared By: Gurpreet Singh


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Why Study POM?... Operations also interacts with other functional areas of

the organization:

Legal

Management Information Systems (MIS)

Accounting

Personnel/Human Resources

Public Relations

Etc.



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Operations InterfacesOperations InterfacesIndustrial

Engineering

MaintenanceDistribution


Public

Relations

Accounting

Operations

Personnel

Purchasing

MIS

Legal


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Why Study POM?... Other functional areas:

Legal: This department is consultant on contracts with employees,

customers, suppliers and transporters and also liability on environment

ssues.

Accounting: Supplies information to management on costs of labor,

materials and overhead, may provide reports on items such as scarp,

downtime and inventories.

MIS: Concerned with providing management with the information it

needs to effectively manage.



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Why Study POM?... Other functional areas:

Personnel/Human Resources: This department is concerned with

recruitment and training of personnel, labor relations, contract

nego a ons, wage an sa ary a m n s ra on, ass s ng n manpower

projections and ensuring the health and safety of employees.

Public Relations: Responsible for building and maintaining a

positive public image of the organization for customers and employees.



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Career Opportunities Operations Manager

Production Analyst

Production Manager

Supply Chain Manager

Quality Analyst

Quality Manager

Industrial Engineer

Time Study Analyst

Inventory Manager

Purchasing Manager

Schedule Coordinator

Distribution ManagerPrepared By: Gurpreet Singh


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People who work in operations field should have a skill set

that include both People Skills and Knowledge Skills.

People skills include :

Political Awareness

Knowledge skills include:

Good Decision Making

Career Opportunities

Mentoring Ability Collaboration

Negotiation

Communication Skills Etc.

Product and/or Serviceknowledge

Process knowledge

Industry & Global knowledge Financial & Accounting skills

Etc.



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Historical Evolution of Operations Management

Industrial revolution

Scientific management

Mass production

Interchangeable parts Division of labor

Human relations movement

Decision models

Influence of Japanese manufacturers



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Industrial evolution: (1770s)

Began in 1770s in England and spread to the rest of Europe and to theUnited States during 19th Century. Prior to this time, goods were

roduced in small sho s b Craftsmen an their a rentices.

In 18th

Century face of production was changed by substituting machinepower for human power (e.g. Steam Engine, etc.), New machines made

of Iron were much stronger than wooden machines.

Craft Production: System in which highly skilled workers use simple, flexible tools to

produce small quantities of customized goods. (Slow & Costly, No

Economies of Scale.)Prepared By: Gurpreet Singh


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Scientific Management: (1911)

Frederick Winslow Taylor = Father of Scientific Management

believed that management should be responsible for planning, carefully

selecting and training workers, finding the best way to perform each job,

achieving cooperation between management and workers, and separating

management activities from work activities.

Frank Gilbreth (Industrial Engg.)= Father of Motion Study

Henry Gantt: Developed Gantt Charts

Henry Ford: Developed concept of Moving Assembly Lines.



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Scientific management: (1911)

Mass Production: (Fords Contribution)

System in which low-skilled workers use specialized machinery to

produce high volumes of standardized goods.

Interchangeable Parts: (Eli Whitney = American Inventor)

Parts of a product made to such a precision that they do not have to be

custom fitted i.e. standardized parts.

Division of Labor: (Fords Contribution)

Breaking up of a production process into small tasks, so that each

worker performs a small portion of the overall job.Prepared By: Gurpreet Singh


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Historical Evolution of Operations Management..

Human relations movement (1920-60)

Emphasis on importance of the human element in job design. Emphasis on Motivation:

Maslow Theor : (Abraham Maslow in 1 0s,)

Theory X : (Douglas McGregor in 1960s, Adversarial Environment i.e. Rewardand Punishment)

and Theory Y: (Douglas McGregor in 1960s, Empowered Workers)

Theory Z: (William Ouchi in 1970s, Lifetime Employment, Employee

Problem Solving, Consensus building etc.)



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Historical Evolution of Operations Management..

Decision models: (1915, 1960-70s)

Factory movement accompanied by the development of severalquantitative techniques.

Inventor Mana ement: B F.W. Harris in 1 1

Statistical Procedure for Sampling & Quality Control: By H.F. Dodge,H.G. Romig and W. Shewhart in 1930s (3 workers at Bell Telephone Labs).

Statistical-Sampling Theory: By L.H.C. Tippett in 1935.



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Influence of Japanese manufacturers: (Quality Revolution)

Emphasis on Quality and Continual Improvement. Worker Teams

Customer Satisfaction

Time based management (JIT e.g. Southwest Airlines less ground time

etc.).



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Trends in Business Major trends

The Internet, e-commerce, e-business

Management technology

Globalization

Management of supply chains

Outsourcing

Agility

Ethical behavior



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Trends in Business E-Business:

Use ofinternet to transact business.

E-Commerce:

Consumer-business transactions like: Buying online,

requesting information.



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Trends in Business Management Technology:

Technology: The application of scientific discoveries to thedevelopment and improvement of goods and services.

Product and Service technology: Refers to the discovery and

development of new products and services (R&D).

Process technology: Refers to methods, procedures and equipment

used to produce goods and provide service (Supply Chain Process).

Information technology: Refers to science and use of computers and

other electronic equipment to store, process and send information.



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Trends in Business

Suppliers

Su liersDirect

Producer DistributorFinal

Supply Chain:


Supply Chain: A sequence of activities Andorganizations involved in producing And delivering a

good or service.

A Supply Chain forA Supply Chain for BreadBread


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A Supply Chain for BreadA Supply Chain for BreadStage of Production Value

AddedValue ofProduct

Farmer produces and harvests wheat $0.25 $0.25

Wheat transported to mill $0.08 $0.33


Mill produces flour $0.15 $0.48

Flour transported to baker $0.08 $0.56

Baker produces bread $0.04 $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


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Trends in Business Outsourcing:

Buying goods or services rather than producing goods or performingservices within the organization.

The ability of an organization to respond quickly to demands or

opportunities. It is a strategy that involves maintaining a f lexible system

that can quickly respond to changes in either the volume of demand or

changes in product/service offerings.

Ethical Behavior



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Other Important Trends Operations strategy

Working with fewer resources

Revenue management

Process analysis and improvement Increased regulation and product liability

Lean production



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Other Important Trends Operations Strategy:

The approach consistent with the organization strategy that is used to guide

the operations function.

Working with fewer resources:

Due to lay offs, corporate downsizing, cost cutting etc. is forcing managers

to make trade-off decisions on resource allocation and to place increased

emphasis on cost control and productivity improvement.

Revenue management:

Method used by some companies to maximize the revenue they receive from

fixed operating capacity by influencing demand through price

manipulation, also known as yield management.



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Other Important Trends Process analysis and improvement:

Includes cost and time reduction, productivity improvement, process yield

improvement, quality improvement and customer satisfaction (6 Sigma).

E.g. Kodak was able to cut in half the time needed to bring a new camera to

market etc.

Increased regulation and product liability

Lean Production:

System that uses minimal amounts of resources to produce a high volume of high-

quality goods with some variety. Highly skilled workforce and flexible equipment.

An emphasis on quality, flexibility, time reduction and teamwork. Flattening of

organizational structure with fewer management levels.


1 pom an introduction

Documents