Introduction

DS 412Spring 2014

Outline

1. Define operations management.2. Three major functional areas of organization.3. Service vs. manufacturing operations.4. Decision making in operations management

(OM).

What is Operations Management?

Operations Management is:

The management of systems or processes that create goods and/or provide services.

The Organization

The Three Basic Functions

Organization

FinanceManage cash flows, assets and capital

investments

OperationsManage people,

equipment, material, technology,

information. Produce goods and

services.

MarketingMange customer

demand. Generate sales for

goods/services

Conversion of inputs into outputs

The Operations FunctionThe operations function involves the conversion of inputs into outputs

Value-added is the difference between the cost of inputs and the value or price of outputs.

Inputs Transformation/Conversion

process

Outputs Goods Services

Control

Value added

Labor FacilitiesEquipmentMaterialCapitalTechnology

Goals of the Transformation Process

1. To add valueValue added is the net increase between output

product value and input material value.

2. To improve efficiencyEfficiency – means performing activities well for

least possible cost.

DS 412 will cover several methods and approaches

to achieve these goals.

Manufacturing Goods vs. Providing ServicesKey Differences Goods Services

Output Tangible Intangible

Uniformity of input High Low

Uniformity of output

High Low

Customer contact Low High

Time lag High Short

Labor content Low High

Measuring productivity

Easier Harder

Quality assurance Easier Harder

Automobile assembly, steel making

Home remodeling, retail sales

Automobile Repair, fast food

Goods-Service Continuum

Computer repair, restaurant meal

Song writing, software development

Goods ServiceSurgery, teaching

Both use technology must forecast demandhave quality, productivity, & response issuescan have capacity, layout, and location issueshave customers, suppliers, scheduling and staffing issues

Many of the topics we cover in DS 412 apply to both services and manufacturing.

Similarities for Service/Manufacturers

Decisions in OMAll organizations make decisions and follow a similar path

First decisions – Strategic decisionsset the direction for the entire company; broad in scope and long-term in nature.

Second decisions – Tactical decisionsfocus on specific day-to-day issues like resource needs, schedules, & quantities to produce

Tactical and Strategic decisions must align

How are Decisions Made in OM?

Extensive use of: Models and Quantitative approaches.

Models are abstractions of reality.— Easy to use, less expensive.— Provide useful insight to the problem.— Enable “what if” questions. usually a Mathematical model

Caution: Numerical results may be over-emphasized over qualitativeinformation.Models may be poorly designed.

Analysis of trade-offs and priorities.What are the pros and cons?

Tradeoffs

Model Example

Real Life Problem

Abstract

Make Assumpitions

Model

What are the Key Questions/Decisions?

What: What resources/what amountsWhen: Needed/scheduled/orderedWhere: Work to be doneHow: DesignedWho: To do the work

To answer these questions , tradeoffs must be made on Cost? Quality? Time? Flexibility?All of the above? Some?

Organization of Text Book Chapter 1 IntroductionChapter 2 Strategy and CompetivenessChapter 3 Product Design & Process SelectionChapter 4 Supply Chain ManagementChapter 5 Total Quality ManagementChapter 6 Statistical Quality ControlChapter 7 Just in Time and Lean SystemsChapter 8 ForecastingChapter 9 Capacity Planning & Facility LocationChapter 10 Facility LayoutChapter 11 Work System DesignChapter 12 Inventory ManagementChapter 13 Aggregate PlanningChapter 14 Resource PlanningChapter 15 SchedulingChapter 16 Project ManagementSupplement B Introduction to Optimization

Strategic

TacticalWe will omit shaded chapters.The chapters we cover are shown in red: 1,5,6,8,9,12,16

Sequence of Topics in this Course

Chapter 1: Introduction to Operations ManagementChapter 8: ForecastingChapter 9: Capacity Planning & Facility LocationSupplement B: Introduction to OptimizationChapter 12: Inventory ManagementChapter 16: Project ManagementChapters 5 & 6: Quality Management