Unit 4: Operations 

Unit 4 Course Objectives

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1. Identify and explain the concepts of best practices.2. Explain the importance of both quality and performance measurement.3. Define the major components of a production system and provide examples of each for both a manufacturing and a service system.

Operations Seminar

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This seminar will focus on production and operations management. Be ready to discuss the following topics:1. The contributions to operations management made by Frederick Taylor and Edward Deming.2. The importance and concepts of business metrics and the role they play in decision making.

Operations

Organization

Finance Operations Marketing

Three Major Functions of Business Organizations

Defining Operations:

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All Activities related to producing goods and services in manufacturing, assembly (goods) and in healthcare, retailing, transportation, hotels, etc. (services). The overall focus of operations is to add-value in the transformation process (Stevenson, 2001).

Value-added:” Difference between the cost of the inputs and the value or price of the outcome” (Stevenson, 2001, p. 7).

Transformation: A systematic process

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INPUTS:

LANDLABOR

RAW MATERIALINVENTORY

OUTPUTS:

GOODSSERVICES

VALUE-ADD:

TRANSFORMATIONPROCESSES

CONVERSIONJOB TASKSACTIVITIES

CONTROL

Operations Manager

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Key figure in the organization Planner & Decision-Maker Applies quantitative approaches, analysis of trade-

offs, and the systems approach in decision-making Establish priorities Ethical decision-making:

1. worker safety, 2. product safety, 3. quality, 4. adherence to regulations, 5. Environmental concerns, 6. hiring & firing, 7. closing organizations, and 8. recognition of workers’ rights.

Quantitative Approaches

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Use of mathematical logic to solve problems

Applied by Taylor in scientific management method

Heavily influenced by the US Military after WWII to increase efficiencies and effectiveness in decision-making and problem solving.

Widely applied in organizations

Analysis of Trade-offs

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A type of pros and cons approach in assessing the strengths and weaknesses of different decisions and the effect of the decision on other areas.

A simple example is in determining if keeping the store open 24 hours is beneficial relative to increases in wage and utility expenses.

Another approach is to “weigh” different decisions and alternatives using a numerical rating scale to measure the outcomes.

Systems Approach

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The whole is greater than the sum of the parts—Aristotle (382BC- 324BC).

All parts must work together to generate the targeted outcome.

The organization is a system consisting of subsystems such as operations, finance, marketing, human resources, quality, etc., (Stevenson, 2001).

Leaders must develop awareness of all components in the system for effective planning, decision-making, and problem solving.

Events leading to operations management

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Industrial revolution (late 1700- mid 1900s): the industrial era in the United States indicated a paradigmatic shift from the pre-industrial era of the entrepreneur and craftsman (Jacques, 1996).

The industrial era stimulated the growth of industrial towns, produced professional managers, and increased productivity. In the 1900s, the research of Adam Smith, developed in the 1700s, merged with the work of Frederick Taylor in the 1900s, leading to scientific management, which served as a panacea-like solution to improve organizational efficiency and effectiveness. However . . .

Events leading to operations management cont.

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After World War II, organizations in the United States focused on mass production and as characteristic of high tempo productivity, the number of defects increased as the production numbers increased, leading to numerous defective products.

The overall quality performance levels were low, and organizations attempted to address the quality issues through minimum inspection standards or through service contracts (warranties/service centers). although the focus on mass production remained as one of the primary objectives in manufacturing organizations (Clardy, 2001).

The US quickly became a world leader based on its ability to meet the demand of people in numerous countries heavily influenced by the success of the scientific management principles.

Contributions to operations management by Frederick Taylor

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Frederick W. Taylor (1911) in The Principles of Scientific Management had a tremendous impact on industrialization through the application of scientific methods to analyze, record, and measure the interaction between man (humans) and the machine or task (Productivity).

Taylor, through inspection, observation, and experimentation was able to customize the machine/task/tool to increase the productivity of the workforce. In this sense, Taylor initiated the standards and criteria that later transformed into production quotas, hiring requirements, and provided a stimulus to jump start the industrial revolution and mass production.

Taylor’s studies contributed to transforming random organizational practices and processes into clear scientific processes designed to measure and monitor performance levels, rates of production, and time management criteria (control mechanisms).

Contributions to operations management by Edward Deming

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Dr. W. Edward Deming’s contributions occurred through his research combining scientific methods with statistical methods to develop statistical control charts during this period.

Deming attempted to share the innovative statistical methods and unique quality management concept with industrial organizations, but drew little attention from the industrial giants (O'Toole, 1996).

Deming developed a quality philosophy embraced by the Japanese businesses years before American business leaders accepted it.

The importance and concepts of business metrics and the role they play in decision making

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We must employ business metrics (measurable objectives and goals) to determine where we stand in the industry, market, and in the eyes of our customers!

If we cannot measure it, we are either not using the right tools or we failed to establish the criteria (performance measures, quality levels, customer satisfaction levels, return on investments, etc.). Many small businesses have a weaknesses in this area.

Of course, inaccurate business metrics can lead to ambiguity, uncertainty, and costly mistakes!

Unit 4 Assignment:

For this project, you have two parts to complete. In a 5 to 6 page paper, address the following areas:

The first part involves discussing the daily operations of your particular business.

 If you are in a production environment, please provide detailed instructions on how you plan to manufacture your product.

If you are a service-based business, please explain the business flow of how you plan to service your client base.

For the second part, suppose that you are either using offshore manufacturing or have outsourced services to another country.

Please evaluate how economics, the government, and laws could affect value creation from a global context.  

Assignment checklist

1.  Evaluate the impact of economics and the government on business operations.

2.  Predict the impact of laws on business operations.

3.   Assess how business operations can affect value creation in the global context.

Questions?

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ReferencesClardy, A. (2001). Managing quality fads: How American

business learned how to play the game. Personnel Psychology, 54(2), 508-514. Retrieved February 14, 2005, from ProQuest Academic Research Library Database.

Jacques, R. (1996). Managing the employee: Management knowledge from the 19th century to 21st century. Sage Publications, Inc.

O’Toole, J. (1996). Leading change: The argument for values-based leadership. Jossey-Bass, Inc.

Stevenson, W. J. (2001). Production/operations management (6th ed.). Boston, MA: McGraw-Hill Publishing, Inc.

Taylor, F. W. (1911/1998). The principles of scientific management. Dover Publications, Inc.