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Adeyl Khan, Faculty, BBA, NSU
Why some companies succeed While others fail
Walmart Vs. Sears/JC PennyBoeing missed production deadline …
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Adeyl Khan, Faculty, BBA, NSU
Operations ManagementManaging that part of the organization
responsible for producing goods and services
Management of systems or processes that create goods and/or provide services
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Adeyl Khan, Faculty, BBA, NSU
An OrganizationThe Three Basic Functions
1-3
Figure 1.1
What is producing?
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Adeyl Khan, Faculty, BBA, NSU 1-4
Value-Added ProcessValue-Added Process
The operations function involves the conversion of inputs into outputs
Inputs * Land * Labor* Capital
Transformation/Conversion
process
Outputs Goods
Services
Control(Measurement)
Feedback
FeedbackFeedback
Value added
Figure 1.2
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Adeyl Khan, Faculty, BBA, NSU 1-5
Food ProcessorFood ProcessorTable 1.2
Inputs Processing Outputs
Raw Vegetables Metal SheetsWaterEnergyLaborBuildingEquipment
CleaningMaking cansCuttingCookingPackingLabeling
Canned vegetablesScraps!
What about services?
Value-added = Value or price of outputs – Cost of inputs
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Adeyl Khan, Faculty, BBA, NSU 1-6
Manufacturing or Service?Manufacturing or Service?
Tangible Act
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Adeyl Khan, Faculty, BBA, NSU 1-7
Automobile assembly, steel making
Home remodeling, retail sales
Automobile Repair, fast food
Goods-service ContinuumGoods-service ContinuumFigure 1.3
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
Grameen Cell phone
Product/Service?
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Adeyl Khan, Faculty, BBA, NSU 1-8
Hospital ProcessHospital ProcessTable 1.2
Inputs Processing Outputs
Doctors, nursesHospitalMedical SuppliesEquipmentLaboratories
ExaminationSurgeryMonitoringMedicationTherapy
Healthy patients
Product packages = Good(s) + service(s)Added Value
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Adeyl Khan, Faculty, BBA, NSU
Production of Goods vs. Delivery of ServicesProduction of goods
Tangible output Production oriented
Delivery of services An act
Yet operations are similar!
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Adeyl Khan, Faculty, BBA, NSU
Goods vs ServiceCharacteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
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Example!
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Adeyl Khan, Faculty, BBA, NSU
Scope of Operations ManagementForecastingCapacity planningSchedulingManaging inventoriesAssuring qualityMotivating & Training employeesDeciding where to locate facilitiesSupply chain management
And more . . .
1-11
Example!
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Adeyl Khan, Faculty, BBA, NSU 1-12
Types of OperationsTypes of OperationsTable 1.4
Operations Examples
Goods Producing
Farming, mining, construction manufacturing, power generation
Storage/Transportation
Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines
Exchange Retailing, wholesaling, banking, renting, leasing, library, loans
Entertainment Films, radio and television, concerts, recording
Communication Newspapers, radio and television, newscasts, telephone, satellites
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Adeyl Khan, Faculty, BBA, NSU
Decline in Manufacturing Jobs in US!Increase of Service JobsProductivity
Increasing productivity allows companies to maintain or increase their output using fewer workers
Outsourcing Some manufacturing work has been
outsourced to more productive companies
1-13
Bangladesh!
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Adeyl Khan, Faculty, BBA, NSU
Manufacturing MattersMore than half of the total R&D performed
is in the manufacturing industriesWhen a California manufacturing job is
lost, an average of 2.5 service jobs are lostAccounts for most exports
1-14
What aboutOutsourcing
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Adeyl Khan, Faculty, BBA, NSU
Managing Services is ChallengingService jobs are often less structured than
manufacturing jobsCustomer contact is higherServices hire many low-skill, entry-level
workers Employee turnover is higher
Input variability is higherService performance can be affected by
worker’s personal factors
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Adeyl Khan, Faculty, BBA, NSU
Operations Management Planning and Decision Making
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Adeyl Khan, Faculty, BBA, NSU
Decision Making of an O. Manager
1-17
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Adeyl Khan, Faculty, BBA, NSU
Approaches (Make Informed Decision)1- Models2- Quantitative approaches3- Analysis of trade-offs4- Systems approach5- Establishing prioritiesEthics
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Adeyl Khan, Faculty, BBA, NSU
A model is
1-19
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Adeyl Khan, Faculty, BBA, NSU
1- ModelsAn abstraction of reality.A simplified version (typically)
Physical ~ Crash test Schematic ~ Blueprints Mathematical ~ Statistical
1-20
Tradeoffs
Models are not perfectPros and cons of models
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Adeyl Khan, Faculty, BBA, NSU 1-21
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Adeyl Khan, Faculty, BBA, NSU
2- Quantitative ApproachesLinear programmingQueuing TechniquesInventory modelsProject modelsStatistical models
1-22
Vs.Qualitative Approache
s
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Adeyl Khan, Faculty, BBA, NSU
3- Analysis of Trade-OffsDecision on the amount of inventory to
stock
1-23
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Adeyl Khan, Faculty, BBA, NSU
Systems Approach“The whole is greater than the sum of the parts.”
1-24
SuboptimizationSuboptimization
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Adeyl Khan, Faculty, BBA, NSU
5- Establishing prioritiesPareto Phenomenon• A few factors account for a high
percentage of the occurrence of some event(s).
• 80/20 Rule - 80% of problems are caused by 20% of the activities.
1-25
How do we identify the vital few?
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Adeyl Khan, Faculty, BBA, NSU
Ethical IssuesConsider how a decision will affect
Shareholders ~ Financial statements Management Employees ~ Worker safety, Hiring/firing
workers, Worker’s rights Customer ~ Quality, Product safety Community ~ Closing facilities Environment ~ Product safety
1-26
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Adeyl Khan, Faculty, BBA, NSU 1-27
Business Operations OverlapBusiness Operations OverlapFigure 1.5
Operations
FinanceMarketing
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Adeyl Khan, Faculty, BBA, NSU
Operations Interfaces
1-28
Public Relations
Accounting
Production
Operations
Marketing
Personnel
Purchasing
Distribution
MIS
Legal
Lead time
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Adeyl Khan, Faculty, BBA, NSU
Historical Evolution of Operations ManagementIndustrial revolution (1770’s)
End of craft production Introduction of Machine Power
Scientific management (1911) & Ford Model T Mass production Interchangeable parts Division of labor
Human relations movement (1920-60)~ HawthorneDecision models (1915, 1960-70’s)~ IM Models,
SPCInfluence of Japanese manufacturers (After WWII)
Quality revolution
1-29
Table 1.7
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Adeyl Khan, Faculty, BBA, NSU
Trends in Business impacting OM The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior Operations strategy Working with fewer resources Revenue management Process analysis and improvement Increased regulation and product liability Lean production
1-30
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Adeyl Khan, Faculty, BBA, NSU
Discussion & Review Questions (P26-27)No. 4,5,7,10,15
Wegmans Food market (P30-32)Answer Q. No. 2
31
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Adeyl Khan, Faculty, BBA, NSU 1-32
Suppliers’ Suppliers
DirectSuppliers Producer Distributor Final
Consumer
Simple Product Supply ChainSimple Product Supply ChainFigure 1.7
Supply Chain: A sequence of activitiesAnd organizations involved in producingAnd delivering a good or service
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Adeyl Khan, Faculty, BBA, NSU 1-33
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
A Supply Chain for BreadA Supply Chain for Bread
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Adeyl Khan, Faculty, BBA, NSU
Learning ObjectivesDefine the term operations managementIdentify the three major functional areas of
organizations and describe how they interrelate
Compare and contrast service and manufacturing operations
Describe the operations function and the nature of the operations manager’s job
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Adeyl Khan, Faculty, BBA, NSU
Learning ObjectivesDifferentiate between design and operation
of production systemsDescribe the key aspects of operations
management decision makingBriefly describe the historical evolution of
operations managementIdentify current trends that impact
operations management
1-35