Chapter 1 MIS 373 Basic Operations Management Learning Objectives After this lecture students will be able to Define the terms operations management and supply chain Identify the three major functional areas of organizations and describe how they interrelated ID: 733365
Download Presentation The PPT/PDF document "Introduction to Operations Management" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Introduction to Operations Management
Chapter 1
MIS 373: Basic Operations ManagementSlide2
Learning Objectives
After this lecture, students will be able to
Define the terms
operations
management
and supply chainIdentify the three major functional areas of organizations and describe how they interrelatedIdentify similarities and differences between production and service operationsExplain the key aspects of operations management decision makingExplain the need to manage the supply chain
MIS 373: Basic Operations Management
2Slide3
What comes to mind
when you hear
“operations management”?Slide4
Amazon’s Warehouse
in
Phoenix
(
facility size: 1.2 million-square-foot
)Image Credit: bizbeatblog.dallasnews.comSlide5
ABC News:
Inside Amazon: Secrets of an Online Mega-GiantSlide6
P&G’s
Products
Image
Credit:
pgbeautyscience.comSlide7
Hilton Hotels
Image Credit: pgbeautyscience.comSlide8
Starbucks
Image Credit: WikipediaSlide9
Operations
Management
What is operations?The part of a business organization that is responsible for producing goods or
services
What is
operations management?The management of systems or processes that create goods and/or provide servicesOperations management affects:Companies’ ability to competeMIS 373: Basic Operations Management
9Slide10
Basic Functions of the Business Organization
MIS 373: Basic Operations Management
10Slide11
Business Functions are Interconnected
MIS 373: Basic Operations Management
11Slide12
The Transformation Process
Feedback = measurements taken at various points in the transformation process
Control = The comparison of feedback against previously established standards to determine if corrective action is needed.
MIS 373: Basic Operations Management
12
Inputs
Land
Labor
Capital
Information
Outputs
Goods
Services
Transformation/
Conversion
Process
Control
Measurement
and Feedback
Measurement
and Feedback
Measurement
and Feedback
Value-Added
= value/price of output - cost of inputSlide13
Good or Service?
Goods: physical
items that include raw materials, parts, subassemblies, and final products.Services: activities that provide some combination of time, location, form or psychological value.
MIS 373: Basic Operations Management
13
Goods
Services
Automobile Assembly, Steelmaking
Home Remodeling, Retail Sales
Computer Repair, Restaurant Meal
Songwriting, Software Development
Surgery, Teaching
Goods-service ContinuumSlide14
Key Differences
Characteristic
Goods
Service
Customer contact
Low
High
Uniformity of input
High
Low
Labor content of jobs
Low
High
Uniformity of output
High
Low
Production and delivery (
Output)
Tangible
Intangible
Measurement of productivity
Easy
Difficult
Quality assurance
(Opportunity to correct problems)
High
Low
Amount of inventory
Much
Little
Evaluation of work
Easier
Difficult
Ability to patent design
Usually
Not usual
MIS 373: Basic Operations Management
14Slide15
Key Differences
Characteristic
Goods
Service
Customer contact
Low
High
Uniformity of input
High
Low
Labor content of jobs
Low
High
Uniformity of output
High
Low
Production and delivery (
Output)
Tangible
Intangible
Measurement of productivity
Easy
Difficult
Quality assurance
(Opportunity to correct problems)
High
Low
Amount of inventory
Much
Little
Evaluation of work
Easier
Difficult
Ability to patent design
Usually
Not usual
MIS 373: Basic Operations Management
15
Prompt questions:
Q1: We
have seen the differences between production of goods and delivery of services. What are the implications of these differences to operations managers?Slide16
Process Management
Three Categories of Business Processes:
Upper-management processesThese govern the operation of the entire organization.
Operational processes
These are core processes that make up the value stream.
Supporting processesThese support the core processes.Managing a Process to Meet DemandIdeally, the capacity of a process will be such that its output just matches demand.MIS 373: Basic Operations Management
16Slide17
Supply & Demand
MIS 373: Basic Operations Management
17
Supply
Demand
>
Supply
Demand
<
Supply
Demand
=
Wasteful
Costly
Opportunity Loss
Customer
Dissatisfaction
Ideal
Operations &
Supply Chains
Sales &
MarketingSlide18
Supply & Demand
MIS 373: Basic Operations Management
18
Supply
Demand
>
Supply
Demand
<
Supply
Demand
=
Wasteful
Costly
Opportunity Loss
Customer
Dissatisfaction
Ideal
Operations &
Supply Chains
Sales &
Marketing
Prompt questions:
Q2: Why
is it difficult to match supply and demand?
Q3: What
actions could a manager take
to better
match supply and demand
?
Supply & Demand – VA Hospital
(
CNN AC360,
2:14 to
3:00)Slide19
Discussions
Prompt questions:
Q1:
What are the implications of these differences between goods and services to operations managers?
Q2:
Why is it difficult to match supply and demand?
Q3:
What actions
can a
manager take to
better match
supply and demand?
Directions:
Form groups of two with a peer from a different department
Discuss the three prompt questions (15 minutes)
In the discussion, try to bring in domain expertise from you major
Briefly summarize your answer to each question on paperSlide20
Process Variation
Four Sources of Variation:
Variety of goods or services being offered
The greater the variety of goods and services offered, the greater the variation in production or service requirements.
Structural variation in demand
These are generally predictable (seasonal variation or seasonality, e.g., swimwear, warm clothes, Christmas, tourist seasons, school supplies).They are important for capacity planningRandom variationNatural variation that is present in all processes (e.g., random demand etc.). Generally, it cannot be influenced by managers.Assignable variation
Variation that has identifiable sources. (e.g., defective inputs, incorrect work methods, equipment etc.)
This type of variation can be reduced, or eliminated, by analysis and corrective action.
MIS 373: Basic Operations Management
20Slide21
Role of the Operations Manager
Recap:Operations: The part of a business organization that is responsible for producing goods or
servicesOperations management:
The management of
systems
or processes that create goods and/or provide servicesA primary function of the operations manager is to guide the system by decision making.System Design DecisionsSystem Operation DecisionsMIS 373: Basic Operations Management21Slide22
System Design Decisions
System DesignCapacityFacility location
Facility layoutProduct and service planningThese are typically strategic decisions
that
usually require long-term commitment of resources
determine parameters of system operationMIS 373: Basic Operations Management22Slide23
System Operation Decisions
System OperationThese are generally tactical and operational decisions
Management of personnelInventory management and controlScheduling
Project management
Quality
assuranceOperations managers spend more time on system operation decision than any other decision areaThey still have a vital stake in system designMIS 373: Basic Operations Management23Slide24
Decision Making
Most operations decisions involve many
alternatives that can have quite different impacts on costs or profits
Typical operations decisions include:
What
: What resources are needed, and in what amounts?When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered?
Where: Where will the work be done?
Who
:
Who will do the work?
How
:
How will
the
product or service be designed? How will the work be done? How will resources be allocated?
MIS 373: Basic Operations Management
24Slide25
Quantitative Methods
A decision making approach that frequently seeks to obtain a mathematically optimal solution
Linear programming
Queuing techniques
Forecasting techniques
Inventory modelsProject modelsStatistical modelsModeling is a key tool used by all decision makersModel: an abstraction of reality; a simplification
Common features of models:They are simplifications of real-life phenomena
They omit unimportant details of the systems they mimic so that attention can be
focused on the most important aspects
of the real-life system
MIS 373: Basic Operations Management
25Slide26
Benefits / Limitations
of Models
BenefitsModels are generally
easier to use
and
less expensive than dealing with the real systemRequire users to organize and sometimes quantify informationIncrease understanding of the problemEnable managers to analyze “What if?”
questions
Limitations
Quantitative information may be emphasized at the expense of qualitative information
Models may be incorrectly applied and the results misinterpreted
This is a real risk with the widespread availability of sophisticated, computerized models are placed in the hands of uninformed users.
The use of models does not guarantee good decisions
.
MIS 373: Basic Operations Management
26Slide27
Key Issues
for Today’s Business Operations
Economic conditions
Management
of technology
The Internet, e-commerce, e-businessCompeting in a global economyGlobalization, outsourcingSupply chain management (more in the following slides)Environmental concerns and sustainabilityGlobal warming, carbon footprintEthical conductWorker safety, product safety, the community, hiring/firing workers, …CNN 4/23/14: A fatal wait: Veterans languish and die on a VA hospital's secret list“We're making our appointments within 10 days, within the 14-day frame, when in reality it had been six, nine, in some cases 21 months”
MIS 373: Basic Operations Management
27Slide28
US Carbon
Footprint
The United States has been one of the few bright spots for climate-change policy in recent years. Thanks to the recession, improved efficiency measures and the shale-gas boom, the nation's carbon-dioxide emissions from energy
fell 12 percent
between 2005 and 2012
.
Strategies
Energy Efficiency
Energy Conservation
Fuel Switching
Carbon Capture and Sequestration
Source
:
The Washington Post 1/13/14
Source
:
US Environmental Protection AgencySlide29
Worker Safety
WSJ
4/21/14
http
://
online.wsj.com/news/articles/SB10001424052702303873604579493502231397942
Inside Nike's Struggle to Balance Cost and Worker Safety in Bangladesh
Nike, which first used a factory in Bangladesh in 1991, had kept its footprint there small, never working with more than 10
factories. The
rest of the industry moved more aggressively into Bangladesh.
The decision came not long before another garment-manufacturing hub known as
Rana
Plaza collapsed
, killing 1,100 people in a suburb of Dhaka, in the worst industrial disaster in Bangladesh's history. The tragedy, which happened a year ago this month, has forced Western apparel sellers to re-examine their world-wide search for cheap labor, which has turned Bangladesh into an exporter of $20 billion of clothing a year.Slide30
Supply Chain
Supply ChainA sequence of activities and organizations involved in producing and delivering a good or service
MIS 373: Basic Operations Management
30
Suppliers’
suppliers
Direct
suppliers
Producer
Distributor
Final
CustomersSlide31
The Need for Supply Chain Management
In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems:
Oscillating inventory levelsInventory stockoutsLate deliveries
Quality problems
MIS 373: Basic Operations Management
31Slide32
Supply Chain Issues
The need to improve operations
The
need to manage
inventories
Increasing transportation costsIncreasing levels of outsourcingIncreasing importance of e-businessCompetitive
pressures
Increasing
globalization
The
complexity of
supply chains
MIS 373: Basic Operations Management
32Slide33
Supply Chain Issues
1. The
need to improve operationsSustainability Productivity
(more in chapter 2)
Efficiency (more in chapter 5)
Quality (more in chapters 9 & 10)MIS 373: Basic Operations Management33Slide34
Supply Chain Issues
2. The
need to manage inventoriesJust in time (JIT)
Vendor Managed Inventory (VMI
)
LogisticsMIS 373: Basic Operations Management34Slide35
Supply Chain Issues
3. Increasing
transportation costs
MIS 373: Basic Operations Management
35Slide36
Supply Chain Issues
4. Increasing levels of
outsourcing
Law of Comparative
Advantage
Benefits of OutsourcingAllow a company to focus on strategic, core competenciesCost savings or cost avoidanceFlexibility for using services as neededChanges fixed costs into variable costsTypes of Business Activities OutsourcedInformation Technology (IT)Human Resources (HR)
Learning Function (Corporate Training)Customer Service (Call centers)Finance
and Accounting
MIS 373: Basic Operations Management
36Slide37
Supply Chain Issues
5.
Increasing importance of e-business
E-business: The
use of internet to network and empower business processes, electronic commerce, organizational communication and collaboration with in a company and with its customers, suppliers, and other stakeholders. (
Combe, 2006)MIS 373: Basic Operations Management37
To
Consumer
Business
Government
From
Consumer
C2C
C2B
C2G
Business
B2C
B2B
B2G
Government
G2C
G2B
G2GSlide38
Supply Chain Issues
6. Competitive pressures
7. Increasing
globalization
8. The complexity of
supply chainsSerdarasan, Seyda. "A review of supply chain complexity drivers." Proceedings of the 41st International Conference on Computers & Industrial Engineering, pp792-797
MIS 373: Basic Operations Management
38Slide39
OM and Supply Chain Career Opportunities
Operations managerSupply chain manager
Production analystSchedule coordinatorProduction managerIndustrial engineer
Purchasing manager
Inventory manager
Quality managerMIS 373: Basic Operations Management39Slide40
Key Points
The operations function is that part of every business organization that produces products and/or delivers services.
Operations consists of processes that convert inputs into outputs. Failure to manage those processes effectively will have a negative impact on the organization.A key goal of business organizations is to achieve an economic matching of supply and demand. The operations function is responsible for providing the supply or service capacity for expected demand.
All processes exhibit variation that must be managed.
MIS 373: Basic Operations Management
40Slide41
Key Points
Although there are some basic differences between services and products that must be taken into account from a managerial standpoint, there are also many similarities between the two.
Environmental issues will increasingly impact operations decision making.Ethical behavior is an integral part of good management practice.All business organizations have, and are part of, a supply chain that must be managed.
MIS 373: Basic Operations Management
41