Chapter 1 Learning Objectives Define the terms operations management and supply chain Identify 3 major functional areas of organizations and describe how they interrelate Identify similarities and differences between ID: 212298
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Slide1
Introduction to Operations Management
Chapter 1Slide2
Learning Objectives
Define
the terms
operations management
and
supply
chain
Identify
3 major functional areas
of organizations and describe how they interrelate
Identify similarities and differences between
production
and
service
operations
Explain the key aspects of operations management
decision making
Describe the
operations function
and the nature of the
operations manager’s job
Describe
current issues
in business that impact operations managementSlide3
What Is “Operations Management”
ABC News: “
Inside Amazon: Secrets of an Online Mega-Giant
”Slide4
Operations Management
What is
operation
?
The part of a business organization that is responsible for producing goods or services.
What is
operation management
?
The management of systems or processes that create
goods
and/or provide
services
.Slide5
The 3 Basic Functions of Business Organizations
Operations
Finance
Marketing
OrganizationSlide6
Operations Function
Inputs
Land
Labor
Capital
Materials
Information
Outputs
Goods
Services
Transformation/
Conversion
Process
Control
Measurement
and Feedback
Measurement
and Feedback
Measurement
and Feedback
Value-Added
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.Slide7
Goods v.s
. Services
Tangible
Act-Oriented
Goods
ServicesSlide8
The Goods-Service Continuum
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
.
Automobile Assembly, Steelmaking
Goods
Services
Home Remodeling, Retail Sales
Computer Repair, Restaurant Meal
Songwriting, Software Development
Surgery, TeachingSlide9
Discussion
How goods are different from services?
Hints:
Degree of customer contact
Quality assurance
Inventory
Wages
Ability to patent
…Slide10
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 usualSlide11
Process Management
Process: One or more actions that transform inputs into outputs.
Three Categories of Business Processes:
Upper-management
processes
: These
govern the operation of the entire organization.
Operational
processes
: These
are core processes that make up the value stream.
Supporting
processes: These support the core processes.
Supply v.s. DemandIdeally, the capacity of a process will be such that its output just matches demand.Slide12
Supply and Demand
Supply
Demand
>
Supply
Demand
<
Supply
Demand
=
Wasteful
Costly
Opportunity Loss
Customer
Dissatisfaction
Ideal
Operations &
Supply Chains
Sales &
MarketingSlide13
4 Sources of Process 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 planning
Random variation
Natural 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.Slide14
P&G’s
Products
Image
Credit:
pgbeautyscience.comSlide15
Scope of Operations Management – The Airline Example
Forecasting
Capacity planning
Locating facilities
Facilities and layout
Scheduling
Managing inventories
Assuring quality
Motivating and training employees Slide16
Role of the Operations Manager
Recap:
Operations: The part of a business organization that is responsible for producing goods or services
Operations management: The management of systems or processes that create goods and/or provide services
A primary function of the operations manager is to guide the system by
decision making
.
System
Design
Decisions
System
Operation
DecisionsSlide17
System Design Decisions
System Design
Capacity
Facility location
Facility layout
Product and service planning
These are typically strategic decisions that
usually require long-term commitment of resources
determine parameters of system operationSlide18
System Operation Decisions
System Operation
These are generally tactical and operational decisions
Management of personnel
Inventory management and control
Scheduling
Project management
Quality assurance
Operations managers spend more time on system operation decision than any other decision area
They still have a vital stake in system designSlide19
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?Slide20
General Approach to Decision Making
Modeling
is a key tool used by all decision makers
Model:
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 systemSlide21
Types of Models
Physical Models
Look like their real-life
counterparts
Advantage: visual correspondence with reality
Schematic Models
Look less like their real-life counterparts than physical models (graphs, charts, blueprints, drawings, etc.)
Mathematical Models
Do not look at all like their real-life counterpartsSlide22
Discussion
What are the advantages and disadvantages of models?
Hints:
Usability
Abstraction
Quantities
v.s
. qualitative
SuitabliltySlide23
Benefits of Models
Models are generally
easier to use
and
less expensive
than dealing with the real system
Require users to organize and sometimes
quantify information
Increase
understanding
of the problem
Enable managers to
analyze “What if?”
questionsServe as a consistent tool for evaluation and provide a standardized format for analyzing a problemSlide24
Limitation of Models
Important variables
may be missed
Quantitative
information may be emphasized over
qualitative
Models may be
incorrectly applied
and results misinterpreted
Nonqualified users
may not use the model incorrectlySlide25
Quantitative Methods
A decision making approach that seeks to obtain a mathematically optimal solution
Linear programming
Queuing techniques
Inventory models
Project models
Forecasting techniques
Statistical modelsSlide26
Historical Evolution of OM
Industrial Revolution
Scientific Management
Human Relations Movement
Decision Models and Management Science
Influence of Japanese ManufacturersSlide27
Industrial Revolution
Pre-Industrial Revolution
Craft production - System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods
Some key elements of the industrial revolution
Began in England in the 1770s
Division of labor - Adam Smith, 1776
Application of the “
rotative
” steam engine, 1780s
Cotton Gin and Interchangeable parts - Eli Whitney, 1792
Management theory and practice did not advance appreciably during this periodSlide28
Scientific Management
Movement was led by efficiency engineer, Frederick Winslow Taylor
Believed in a “science of management” based on observation, measurement, analysis and improvement of work methods, and economic incentives
Management
is responsible for
planning
, carefully
selecting
and
training
workers,
finding the best way to perform
each job, achieving cooperate between management and workers, and separating management activities
from work activitiesEmphasis was on maximizing outputSlide29
Scientific Management - contributors
Frank
Gilbreth
- father of
motion studies
Henry Gantt - developed the Gantt chart scheduling system and recognized the value of non-monetary rewards for motivating employees
Harrington Emerson - applied Taylor’s ideas to organization structure
Henry Ford - employed scientific management techniques to his factories
Moving assembly line
Mass productionSlide30
Decision Models & Management Science
F.W. Harris – mathematical model for
inventory
management, 1915
Dodge,
Romig
, and
Shewart
– statistical procedures for sampling and
quality control
, 1930s
Tippett
– statistical sampling theory, 1935Operations Research (OR) Groups – OR applications in warfareGeorge Dantzig – linear programming, 1947Slide31
Human Relations Movement
The human relations movement emphasized the importance of the human element in job design
Lillian
Gilbreth
Elton Mayo – Hawthorne studies on worker motivation, 1930
Abraham Maslow – motivation theory, 1940s; hierarchy of needs, 1954
Frederick Hertzberg – Two Factor Theory, 1959
Douglas McGregor – Theory X and Theory Y, 1960s
William
Ouchi
– Theory Z, 1981Slide32
Influence of Japanese Manufacturers
Refined and developed management practices that increased productivity
Credited with fueling the “quality revolution
Just-in-Time production
Their approach emphasized
quality and continual improvement,
worker teams and empowerment, and
achieving customer satisfaction.Slide33
Discussion
Based on your experience, how do operations today differentiate from previous stages? What are the key issues?
Hints:
What factors came into play?
What factors is not as important as before?
What do you think the new trend will be?Slide34
Key Issues For Today’s Business Operations
Economic conditions
Management of
technology (Innovating)
The Internet, e-commerce, e-business
Competing in a global economy
Globalization,
outsourcing
Quality Problems
Risk ManagementSlide35
Environmental Concerns
Sustainability
Using resources in ways that do not harm ecological systems that support human existence
Sustainability measures often go beyond traditional environmental and economic measures to include measures that incorporate social criteria in decision making
All areas of business will be affected
Product and service design
Consumer education programs
Disaster preparation and response
Outsourcing decisionsSlide36
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 Agency
US Carbon FootprintSlide37
Ethical Issues in Operations
Ethical issues arise in many aspects of operations management:
Financial statements
Worker safety
Product safety
Quality
The environment
The community
Hiring and firing workers
Closing facilities
Workers rightsSlide38
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.
Worker SafetySlide39
Supply Chain
Suppliers’
suppliers
Direct
suppliers
Producer
Distributor
Final
CustomersSlide40
Supply ChainSlide41
Supply Chain
What is
supply chain
?
The sequence of organizations – their facilities, functions, and activities – that are involved in producing and delivering a product or service.Slide42
Discussion
Why does supply chain management matter?
Hints:
From a customer’s perspective
From a manager’s perspective
From a executive’s perspectiveSlide43
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 levels
Inventory
stockouts
Late deliveries
Quality problemsSlide44
Supply Chain Issues
The need to improve operations
The
need to manage
inventories
Increasing transportation costs
Increasing levels of
outsourcing
Increasing importance of
e-business
Competitive
pressures
Increasing
globalization
The complexity of supply chainsSlide45
Supply Chain Issues
1. The
need to improve operations
Sustainability
Productivity
(more in chapter 2)
Efficiency (more in chapter 5)
Quality (more in chapters 9 & 10)Slide46
Supply Chain Issues
2. The
need to manage
inventories
Just in time (JIT)
Vendor Managed Inventory (VMI
)
LogisticsSlide47
Supply Chain Issues
3. Increasing
transportation costsSlide48
Supply Chain Issues
4. Increasing levels of
outsourcing
Law of Comparative
Advantage
Benefits of
Outsourcing
Allow
a company
to
focus on strategic, core
competencies
Cost savings or cost avoidance
Flexibility 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 AccountingSlide49
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)
To
Consumer
Business
Government
From
Consumer
C2C
C2B
C2G
BusinessB2C
B2BB2G
Government
G2C
G2B
G2GSlide50
Supply Chain Issues
6. Competitive pressures
7. Increasing
globalization
8. The complexity of
supply chains
Serdarasan
,
Seyda
. "A review of supply chain complexity drivers." Proceedings of the 41st International Conference on Computers & Industrial
Engineering, pp792-797Slide51
OM and Supply Chain
Career Opportunities
Operations manager
Supply chain manager
Production analyst
Schedule coordinator
Production manager
Industrial engineer
Purchasing manager
Inventory manager
Quality managerSlide52
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.Slide53
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
.