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Definitions:
•“Operations Management
is the set of activities
that creates value that creates value
in the form of goods or services
by transforming inputs into outputs.”-Jay Heizer and Barry Render.
Cars that stop or slow down automatically before an object or person in anticipation of a possible crash are not new. But Toyota’s latest
pre-collision system adds a steering-control feature. In the new system, Toyota uses cameras
and a super sensitive radar called “millimeter-wave”, both installed in the front of the vehicle , to detect possible crashes such as a pedestrian crossing the road. The vehicle calculates how
braking and steering must be applied to avoid a crash, said chief safety technology officer……
crash, said chief safety technology officer……
Definitions:
•“POM is defined as
the design, operation and improvement improvement of the transformation process, which converts the various inputs into the desired outputs of the product and services”-Kaniska Bedi
Supply Chain IllustrationCopyright 2006 John Wiley & Sons, Inc.
10-6
Production System
The elements are:
•Inputs-The basic needs or resources of the system (Land, Building, equipment, capital, raw material etc.)
•Transformation process-Value addition •Transformation process-Value addition process(manufacturing processing, information processing or customer processing)
Production Function/SystemThe elements are:
• Outputs-Desired result of the system, may be goods or services.(output should be of Stakeholders' interest)
• Random disturbances-Both controllable and • Random disturbances-Both controllable and uncontrollable factors influence, causing the difference between planned and actual output.
• Feedback Mechanism-Comparing Actual versus Desired output/process of comparison and adjustment
Transformations
•Physical--manufacturing
•Locational--transportation
•Exchange--retailing
•Storage--warehousing
•Physiological--health care
• Informational--telecommunications
5
Examples of Production Systems
S ystem Inputs Conversion Output(desired)
Hospital PatientsM Ds, NursesM edical SuppliesEquipm ent
Health Care HealthyIndividuals
RestaurantRestaurant Hungry Custom ersFood, ChefServersA tm osphere
Prepare FoodServe Food
SatisfiedCustom ers
Autom obileP lant
Sheet S teelEngine PartsTools, Equipm entW orkers
Fabricationand Assem blyof Cars
H igh Q ualityAutom obiles
University High School G radsTeachers, BooksC lassroom
Transferringof Knowledgeand Skills
EducatedIndividuals
6
Goods and Services?
•“Services never include goods and goods never include services.” (True or false?)
Characteristics of GoodsCharacteristics of Goods
Tangible productTangible product
Consistent product Consistent product definitiondefinition
Production usually Production usually Production usually Production usually separate from separate from consumptionconsumption
Can be inventoriedCan be inventoried
Low customer Low customer interactioninteraction
Characteristics of ServiceCharacteristics of Service
Intangible productIntangible product
Produced and Produced and consumed at same timeconsumed at same time
Often uniqueOften unique Often uniqueOften unique
High customer High customer interactioninteraction
Inconsistent product Inconsistent product definitiondefinition
Often knowledgeOften knowledge--basedbased
Frequently dispersedFrequently dispersed
Goods Versus ServicesGoods Versus Services
Can be resoldCan be resold
Can be inventoriedCan be inventoried
Some aspects of quality Some aspects of quality measurablemeasurable
Selling is distinct from Selling is distinct from
Attributes of GoodsAttributes of Goods(Tangible Product)(Tangible Product)
Attributes of ServicesAttributes of Services(Intangible Product)(Intangible Product)
Reselling unusualReselling unusual
Difficult to inventoryDifficult to inventory
Quality difficult to measureQuality difficult to measure
Selling is part of service Selling is part of service
Table 1.3Table 1.3
Selling is distinct from Selling is distinct from productionproduction
Product is transportableProduct is transportable
Site of facility important for costSite of facility important for cost
Often easy to automateOften easy to automate
Revenue generated primarily Revenue generated primarily from tangible productfrom tangible product
Selling is part of service Selling is part of service
Provider, not product, isProvider, not product, isoften transportableoften transportable
Site of facility important forSite of facility important forcustomer contactcustomer contact
Often difficult to automateOften difficult to automate
Revenue generated primarily Revenue generated primarily from the intangible servicefrom the intangible service
Goods and ServicesGoods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital careHospital care
Advertising agency/investment management
Consulting service/teaching
Counseling
Percent of Product that is a GoodPercent of Product that is a Good Percent of Product that is a ServicePercent of Product that is a Service
100%100% 7575 5050 2525 00 2525 5050 7575 100%100%|| || || || || || || || ||
Figure 1.4Figure 1.4
120120 –
100 100 –
80 80 –
Em
plo
yment
(mill
ions)
Em
plo
yment
(mill
ions)
Manufacturing and Service EmploymentManufacturing and Service Employment
ServiceService80 80 –
60 60 –
40 40 –
20 20 –
0 0 – | | | | | | |19501950 19701970 19901990 2010 (est)2010 (est)
19601960 19801980 20002000
Em
plo
yment
(mill
ions)
Em
plo
yment
(mill
ions)
Figure 1.5 (A)Figure 1.5 (A)
ManufacturingManufacturing
Manufacturing Employment and ProductionManufacturing Employment and Production
– 150150
– 125125
– 100100
Em
plo
yment
(mill
ions)
Em
plo
yment
(mill
ions)
Index:
1997 =
100
Index:
1997 =
100
Industrial Industrial productionproduction(right scale)(right scale)
Figure 1.5 (B)Figure 1.5 (B)
40 40 –
30 30 –
20 20 –
10 10 –
0 0 – | | | | | | |19501950 19701970 19901990 2010 (est)2010 (est)
19601960 19801980 20002000
– 100100
– 7575
– 5050
– 2525
– 00
Em
plo
yment
(mill
ions)
Em
plo
yment
(mill
ions)
Index:
1997 =
100
Index:
1997 =
100
Manufacturingemployment
(left scale)
Service Definition
A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-a customer acting in the role of a co-producer.
Role of Services in an Economy
Trends in U.S. Employment by Sector
40
50
60
70
80
90
Pro
po
rtat
ion
of to
tal e
mplo
yem
en
t
0
10
20
30
40
Pro
po
rtat
ion
of to
tal e
mplo
yem
en
t
Year
Service
Manufacturing
Agriculture
Significant Events in OMSignificant Events in OM
Figure 1.3Figure 1.3
History of Operations
• Cottage SystemTIME
<1700
1700 - 1800
1850s
1890s
Industrial Revolution
Civil War
Scientific Management
Cost Focus# Early Concepts (1776-1880)
# Scientific Management Era (1880 – 1910)# Mass Production Era (1910 – 1980)
1890s
1910s
1930s
1940s
1970s
1980s
1990s
Scientific Management
Hawthorne Studies
Mass Customization
Service Revolution
Global Competition
Operations Research
Moving Assembly Line
12
Quality Focus# Lean Production Era (1980 – 1995)
Customization Focus# Mass Customization Era (1995 - 2010)
History of Operations(Significant Events in OM)
Cost Focus# Early Concepts (1776-1880)
• Labor Specialization (Smith, Babbage)• Standardized Parts (Whitney)
# Scientific Management Era (1880 –1910)
Quality Focus# Lean Production Era (1980 – 1995)
• JIT / CAD • Electronic Data Interchange
• TQM• Baldrige Award• Empowerment
• Kanbans
Customization Focus# Mass Customization Era (1995 - 2010)1910)
• Gantt Charts (Gantt)• Motion and Time Studies (Gilberth)
• Process Analysis (Taylor)• Queuing Theory (Erlang)
# Mass Production Era (1910 – 1980)• Moving Assembly Line (Ford/Sorensen)
• Statistical Sampling (Shewhart)• EOQ (Harris)
• LPP PERT/CPM (DuPont)• MRP
# Mass Customization Era (1995 - 2010)• Globalization
• Internet / E-Commerece• ERP
• Learning Organization• Int’l Quality Standard
• Finite Scheduling• SCM
• Mass Customization• Build – to – order
History of Operations Management
YEAR Concept Tool
1910s
Principle of scientific managementIndustrial psychologyMoving assembly line
Time and work study conceptsMotion studyActivity scheduling chart
Moving assembly lineEconomic lot size
Activity scheduling chartEOQ applied to inventory control
1930s
Quality control
Hawthorne studies of worker Motivation
Sampling inspection and statistical tables for quality ControlActivity sampling for work analysis
Cont’d..
1940sMultidisciplinary team approaches to complex system problems
Simplex Method of linear programming
1950s-Extensive development of operations research tools
Simulation, waiting line theory, decision theory,
1970sWidespread use of computers in business
Services quality and productivity
Shop scheduling, inventory control, forecasting, project management, MRP. Mass production in the service Sector
1950s-1960s
operations research tools theory, decision theory, PERT ,CPM
Cont’d…..
1980sManufacturing strategy ParadigmJIT,TQC and factory AutomationSynchronous manufacturing
Manufacturing as a competitive weaponKanban, CIM, CAD/CAM, robotics etc.
Bottleneck analysis, theory of constraints
1990 Total Quality Baldridge quality Award, ISO 9000. quality
[email protected] Internet, world wide web (Amazon, eBay, Yahoo!,
America online)
1990sTotal Quality Management
Business Process ReengineeringElectronic enterpriseSupply Chain Management
Baldridge quality Award, ISO 9000. quality function Development, Value and concurrent engineering, continuous Improvement paradigmRadical change paradigmInternet, WWW
SAP/R3, Client/server Software
Operations Decision Making
Marketing StrategyFinance Strategy
Marketplace
Corporate Strategy
Operations Strategy
People Plants Parts Processes
Planning and Control
Materials &Customers
Products &Services
Input Output
Operations Management
The Transformation Process (value adding) 4
Industry: Market and Competition
Organizational Strategy:Market Share ; ROI; Resource Development
Business Expansion; Global Operation
POM: Competitive Strategy:Quality ; Cost ; Dependability
Flexibility; Speed
POM: Operational Strategy:Product, Process, Location, Layout, Human
POM: Operational Tactics:Inventory & JIT, Scheduling, Quality, Reliability
& Maintenance
Result
Competitive dimensions
• Cost or Price• Make the product or deliver the service cheap
• Quality• Make a great product or deliver a great service
• Delivery Speed• Delivery Speed• Make the product or deliver the service quickly
Competitive dimensions
• Delivery Reliability• Deliver it when promised
• Coping with Changes in Demand• Change its volume
• Flexibility and New – Product Introduction Speed• Flexibility and New – Product Introduction Speed• Change it
Competitive dimensions
• Other Product – Specific Criteria• Support it
• Technical liaison and support
• Meeting a launch date
• Supplier after-sale support
• Other dimensions• Other dimensions