hum3209 om introduction
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OperationsManagementIntroduction ±Operations and Productivity
© 2006 Prentice Hall, Inc.
PowerPoint presentation to accompanyPowerPoint presentation to accompany
Heizer/Render Heizer/Render
Principles of Operations Management, 6ePrinciples of Operations Management, 6e
Operations Management, 8eOperations Management, 8e
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Learning ObjectivesLearning Objectives
When you complete this chapter,When you complete this chapter,you should be able to:you should be able to:
Identify or DefineIdentify or Define::
Diff. in Services & GoodsDiff. in Services & Goods
Operations management (OM)Operations management (OM)
What operations managers doWhat operations managers do
Production and productivity Production and productivity
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Goods Versus ServicesGoods Versus Services
Table 1.3Table 1.3
Can be resold Can be resold
Can be inventoried Can be inventoried
Some aspects of quality Some aspects of quality
measurablemeasurableSelling is distinct fromSelling is distinct from production production
Product is transportableProduct is transportable
Site of facility important for cost Site of facility important for cost
Often easy to automateOften easy to automate
Revenue generated primarily Revenue generated primarily from tangible product from tangible product
Attributes of Goods Attributes of Goods(Tangible Product)(Tangible Product)
Attributes of Services Attributes of Services(Intangible Product)(Intangible Product)
Reselling unusual Reselling unusual
Difficult to inventory Difficult to inventory
Quality difficult to measureQuality difficult to measure
Selling is part of serviceSelling is part of service
Provider, not product, isProvider, not product, isoften transportableoften transportable
Site of facility important for Site of facility important for customer contact customer contact
Often difficult to automateOften difficult to automate
Revenue generated primarily Revenue generated primarily from the intangible servicefrom the intangible service
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What Is OperationsWhat Is Operations
Management? Management?
ProductionProduction is the creation of is the creation of
goods and servicesgoods and services
Operations management (OM) isthe set of activities that creates
value in the form of goods andservices by transforming inputsinto outputs
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Organizing to ProduceOrganizing to Produce
Goods and ServicesGoods and Services
Essential functions:Essential functions:
Marketing Marketing ± ± generates demand generates demand Production/operationsProduction/operations ± ± createscreates
the product, helps in decisionsthe product, helps in decisions
Finance/accounting Finance/accounting ± ± tracks how tracks how
well the organization is doing, payswell the organization is doing, paysbills, collects the money bills, collects the money
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Marketing Sales promotion
Advertising
Sales
Market research
Organizational ChartsOrganizational Charts
OperationsFacilities
Construction; maintenance
Production and inventory control Scheduling; materials control
Quality assurance and control
Supply-chain management
Manufacturing Tooling; fabrication; assembly
Design
Product development and designDetailed product specifications
Industrial engineering Efficient use of machines, space,
and personnel
Process analysisDevelopment and installation of production tools and equipment
Finance/ accounting Disbursements/ credits
ReceivablesPayablesGeneral ledger
Funds Management
Money market International
exchangeCapital requirements
Stock issueBond issue
and recall
Manufacturing
Figur e 1.1(C)Figur e 1.1(C)
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Organizational ChartsOrganizational Charts
Operations
Ground support
equipment Maintenance
Ground Operations
Facility maintenanceCatering
Flight Operations
Crew scheduling Flying CommunicationsDispatching
Management science
Finance/ accounting
Accounting PayablesReceivablesGeneral Ledger
Finance
Cash control
International exchange
Airline
Figur e 1.1(B)Figur e 1.1(B)
Marketing
Traffic
administrationReservationsSchedulesTariffs (pricing)
Sales
Advertising
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The Critical DecisionsThe Critical Decisions
Process and capacity designProcess and capacity design
What process and what capacity will What process and what capacity will these products require? these products require?
What equipment and technology isWhat equipment and technology isnecessary for these processes? necessary for these processes?
LocationLocation
Where should we put the facility? Where should we put the facility?
On what criteria should we base theOn what criteria should we base thelocation decision? location decision?
Table 1.2 (cont.)Table 1.2 (cont.)
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The Critical DecisionsThe Critical Decisions
Layout designLayout design
How should we arrange the facility How should we arrange the facility and material flow? and material flow?
How large must the facility be to meet How large must the facility be to meet our plan? our plan?
Human resources and job designHuman resources and job design
How do we provide a reasonable work How do we provide a reasonable work environment? environment?
How much can we expect our How much can we expect our employees to produce? employees to produce?
Table 1.2 (cont.)Table 1.2 (cont.)
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The Critical DecisionsThe Critical Decisions
Supply Supply- -chain management chain management
Should we make or buy this component? Should we make or buy this component?
Who are our suppliers and who canWho are our suppliers and who canintegrate into our eintegrate into our e- -commerce program? commerce program?
Inventory, material requirementsInventory, material requirements planning, and JIT planning, and JIT
How much inventory of each item should How much inventory of each item should we have? we have?
When do we reWhen do we re- -order? order?
Table 1.2 (cont.)Table 1.2 (cont.)
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The Critical DecisionsThe Critical Decisions
Intermediate and short Intermediate and short± ±termtermscheduling scheduling
Are we better off keeping people on Are we better off keeping people onthe payroll during slowdowns? the payroll during slowdowns?
Which jobs do we perform next? Which jobs do we perform next?
MaintenanceMaintenance
Who is responsible for maintenance? Who is responsible for maintenance?
When do we do maintenance? When do we do maintenance?
Table 1.2 (cont.)Table 1.2 (cont.)
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Measure of process improvement
Represents output relative to input
Only through productivity increasescan our standard of living improve
Productivity Productivity
Productivity =Productivity =Units produced Units produced
Input used Input used
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Productivity CalculationsProductivity Calculations
Productivity =Productivity =Units produced Units produced
Labor Labor- -hours used hours used
= == = 44 units/labor units/labor- -hour hour 1,0001,000250250
Labor Productivity Labor Productivity
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Example 1.6 Example 1.6
Resource Last Year This Year Change Percent Change
Labor 1000
= 3.33
300
1000
= 3.64
275
0.310.31
= 9.3%
3.33
Resin1000
= 2050
1000
= 22.2245
2.222.22
=11.1%20
Capital1000
= 0.110000
1000
= 0.0911000
±0.01 ±0.01
= ±10.0%0.1
Energy1000
= 0.333000
1000
= 0.352850
0.02
0.02= 6.1%
0.33
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Multi Multi- -Factor Productivity Factor Productivity
Output Output
Labor + Material + Energy Labor + Material + Energy + Capital + Miscellaneous+ Capital + Miscellaneous
Productivity =Productivity =
Also known as total factor productivity Also known as total factor productivity Output and inputs are often expressed Output and inputs are often expressed
in dollarsin dollars
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Example 1.7 Example 1.7
L Ye r T Ye r Production 1,000 1,000
La or Hr. @ $10 $3,000 $2,750
Re in @ $5 250 225Ca ita cost/month 100 110
Energy 1,500 1,425
$4,850 $4,510
![(1,000 / 4,850) (1,000 / 4,510)]
(1,000 / 4,850) 0.206 0.222 0.016
7.8% improvement0.206 0.206
!
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Service Productivity Service Productivity
Typically labor intensiveTypically labor intensive
Frequently focused on uniqueFrequently focused on uniqueindividual attributes or desiresindividual attributes or desires
Often an intellectual task performed by Often an intellectual task performed by professionals professionals
Often difficult to mechanizeOften difficult to mechanize Often difficult to evaluate for quality Often difficult to evaluate for quality